Without muss or fuss, Congress just voted overwhelmingly to keep the federal spigot open for six more months. There were no shouting matches, no threats of a government shutdown, no hostage-takings. Even some tea party lawmakers approved the $1.047 trillion measure.
Contrast the smooth legislative action with the lunacy of last year’s debt-ceiling debate, when the United States came within days of defaulting on its IOUs. Standard & Poor’s downgraded the government’s credit rating. The recovery went into reverse as consumers delayed purchases and businesses hunkered down.
Much as we dislike recalling that madness, it’s worth looking back if only because it now seems so manufactured - or worse, economically reckless. If last summer’s fight was necessary to save the country from fiscal wrack and ruin, why is this fall’s continuing resolution, as the measure is called, not a threat to Western civilization? It even adds another $8 billion to the deficit and exceeds the House Republicans’ budget blueprint by $19 billion.
We understand that many lawmakers, in trouble back home and anxious to return to their campaigns, are concerned that a government shutdown would invite an anti-incumbency rout. We also accept that Republicans may be timing their next fiscal showdown for after the election, in case voters turn out President Barack Obama and turn over Senate control to their party. But those are political, not economic, calculations.
A year ago, Republicans cast the debt-ceiling fight as a principled economic response to unsustainable borrowing and the only way to avoid a Greek-like comeuppance at the hands of the bond market. In offering his budget in March, Rep. Paul Ryan, now the party’s vice-presidential nominee, said government debt “continues to rise at a frightening pace, raising fears that a similar crisis may happen here.”
So can we assume that Republicans have now fixed the country’s debt problem? Not at all. In many ways, they did the opposite.
The debt-ceiling drama barely moved the long-term debt trajectory. Instead, it left the country standing at the edge of a fiscal cliff, at the bottom of which lies another recession. It also raised doubts about whether Congress and the White House can govern, and led the rest of the world to question the sanity of the U.S.
As Bloomberg View columnists Betsey Stevenson and Justin Wolfers wrote in May, all the economic data “tell us that a debt-ceiling standoff is an act of economic sabotage.” In July, the Government Accountability Office even concluded that last year’s delays in raising the ceiling increased Treasury’s borrowing costs by $1.3 billion.
The debt-limit fight may also prove to be a Republican own-goal. The outcome of last summer’s debate was an agreement to make deep cuts in defense spending as of January. And with the Bush tax cuts expiring at the same time, the combination is powerful leverage in the Democrats’ favor, leaving Republicans in a shaky negotiating stance.
When a trillion-dollar spending bill flies through Congress, it raises a simple question: Why now and not then? It’s a question voters would do well to ask in the months ahead.