White House/Pete Souza
- US has had a debt ceiling since WWI, when it first went into the bond market big time @MichaelBarone
- Republicans want to get back to the traditional American level of spending @MichaelBarone
- While the government has spent trillions of dollars on stimulus, the economy is still flatlining @MichaelBarone
Back in the 1960s and 1970s, I used to walk to out-of-town news stands to buy onion-skin copies, two or three days old, of the British broadsheets to read about the various currency and debt crises. What a curious thing, I thought, for a great democratic government to be unable to pay its bills.
As they say, that was then. Now it is the United States that is threatened with something similar. For several months Treasury Secretary Timothy Geithner has been warning that the US government will be unable to pay all its bills unless the debt ceiling -- the limit on the amount of money the Treasury can borrow -- is raised.
The United States has had a debt ceiling since the First World War, when it first went into the bond market big time. It has raised it from time to time ever since. When the same party controls the White House and Congress, this is usually a routine matter. The majority party raises the debt limit and the minority party casts cheap-shot votes against it (as then Senator Barack Obama did in 2006). When one party has the White House and the other has majorities in one or both houses of Congress, things can get more dicey. The opposition party sometimes demands concessions in return for casting unpleasant votes for what is seen as a necessary measure.
"The outcome of the US debt limit crisis is far from clear, but it will inevitably frame the central issue in the 2012 campaign: should the US continue moving towards a more European set of public policies?"
But never before, in my memory at least, has the controversy over the debt limit been as central or as bitter as the one going on now. Both sides are quoting the responses to poll questions as evidence that the public is on their side. But polling on issues of which the specifics are largely unfamiliar to the public are limited in value. Small changes in the wording of the questions can produce what appear to be hugely contradictory results.
To understand what is going on, I think it is helpful to keep in mind two figures. One is 25 per cent. The other is 9 per cent.
The 25 per cent is the percentage of gross domestic product spent by the federal government by the actions of the Obama administration and the heavily Democratic 111th Congress in 2009 and 2010. That is an increase -- a huge increase -- from the 20 to 21 per cent of GDP spent by the federal government on average over the past several decades, under administrations and Congresses of both parties. Part of that increase results from a smaller than usual denominator: GDP has been sputtering. But part of it results from a vast increase in spending: 84 per cent in discretionary non-defence spending, if you count the $787 billion stimulus package passed in 2009.
In effect, the Obama Democrats have been shifting from the traditional American level of spending to a level much more like that of Europe. Their more sophisticated defenders will tell you that this is necessary in an ageing country with fast-increasing health-care needs paid for in large part by government. If you are on good terms with them, they will go on to tell you, sotto voce, that if that results in somewhat slower economic growth, well, that's the price you pay for greater security.
The Republicans, especially the 87 freshman Republicans first elected to the House of Representatives in the November 2010 off-year elections, take a different view. They want to get back to the traditional American level of spending. They think the economy will grow robustly only if relieved of the burden of over-large government. They want to repeal the Obamacare health care bill passed in March 2010. They reflect the views of the tea partiers, who represent the largest influx into political activity of previously uninvolved citizens since the peace movement of the late 1960s and early 1970s. Like the peaceniks, the tea partiers --agree with them or not -- responded rationally to an enormous change in public policy on a central issue of the day.
The debt-limit issue has given the Republicans leverage to demand substantial cuts in federal spending. They promised voters they would not approve tax rate increases and, when Barack Obama suddenly demanded such an increase on Thursday, the Republican House Speaker, John Boehner (pronounced BAYner) cut off negotiations with him.
Many commentators and voters are condemning the politicians for bickering. But they are not arguing over which one of them gets to play with a particular toy for the next two minutes. They are arguing about issues of central importance in public policy. Federal spending as a percentage of GDP has never increased by as much as 5 per cent except in wartime, when politicians and voters on all sides agreed there was no choice. The battle over the debt limit is a battle over this fundamental issue. It will not be the last: the 2012 election will be another.
It should be added that the Republicans would not be in a position to advance their claims if the Obama Democrats' economic policies were seen as a smashing success. But on this, the public opinion polls are anything but ambiguous. Most Americans consider the economy to be still in recession, and job creation lags ways behind that in previous recovery periods. Long-term unemployment is the highest since the 1930s, and one in five working age men are unemployed, in prison, on disability or operating in the underground economy. While the government has spent trillions of dollars on stimulus, the economy is still flatlining.
The other number I suggested you should keep in mind is 9 per cent. This is the difference between the popular vote for House of Representatives in November 2008 and November 2010. In 2008, Democrats led by 54 to 43 per cent, a historic high (outside the South) for that party. In 2010, Republicans led by 52 to 45 per cent, also a historic high for that party. Republicans were up 9 per cent, Democrats down by 9 per cent. That is the biggest swing between the two parties in the House popular vote since 1948 and 1946 when, interestingly, the issue of the size and scope of the federal government was before the voters as we demobilised after the Second World War. Britain went one way back then, toward the Labour Party welfare state; America went another.
The US Constitution, with its staggered sets of elections, was designed not to produce a smooth course of government, but to establish an arena of conflict. So now we are seeing a House of Representatives, all 435 of whose members were elected in the heavily Republican year of 2010, in conflict with a Democratic president, elected in the heavily Democratic year of 2008, and in tension with a Senate, two-thirds of whose members were elected in the Democratic years of 2006 and 2008 and one-third in the Republican year of 2010.
This is, of course, profoundly different from the way the British system operates. Margaret Thatcher's Conservatives, taking office in 1979, did not have to negotiate with a Labour majority in the House of Lords. Conservatives, with a theoretical majority in the Lords, did not feel morally entitled to do more than occasionally slow down legislation advanced by New Labour after 1997.
The outcome of the US debt limit crisis is far from clear, but it will inevitably frame the central issue in the 2012 campaign: should the US continue moving towards a more European set of public policies? As I write, Speaker Boehner says he wants the House to pass a measure raising the limit and cutting spending by equivalent amounts, which can pass the Senate. President Obama says he will only sign a Bill that takes the issue off the table until after the November 2012 election. Meanwhile, Senate Majority Leader Harry Reid has suggested a compromise that doesn't include tax increases.
Would Obama really veto such a Bill? Particularly after the dire warnings his Treasury Secretary has issued? My recollection of the British currency and debt crises of the 1960s and 1970s is dim, but they suggest that the answer is no.
Michael Barone is a resident fellow at AEI.