Sunday, May 19, 2013, was one of the saddest and most notorious moments in the sordid history of the federal budget.
Let's start from the beginning.
It's December 2012 and House Republicans are facing a number of politically very difficult and unpalatable choices because taxes will go up automatically on January 1, the sequester will go into effect on January 2 and the by-now- commonplace-but-still-called "extraordinary" measures the Treasury has been using for several months to deal with the problems caused by not raising the debt ceiling are about to be exhausted.
The tax problem was dealt with by agreeing to a smaller increase than was set to happen under current law and then blaming the White House for it. The sequester was postponed until March 1 when both the GOP and the administration thought that the threat of cuts to domestic and military programs, respectively, would cause the other to back down.
But it was the unique and disgraceful way the debt ceiling was handled that deserves the scorn.
In theory, with more exotic options like the trillion dollar coin and 14th amendment rejected by the White House, the only two choices facing Congress at that moment were to vote to increase the debt ceiling so the federal government could borrow the cash it needed to keep operating, or not to raise the borrowing limit and force Washington to default on some of its obligations. It was a very clear pass/fail, true/false, black/white choice.
This presented the House GOP with two very difficult choices. Voting against the debt ceiling hike was becoming increasing untenable as Wall Street and corporate America made it clear that was not an appropriate alternative from a financial perspective. But voting for the debt ceiling increase was a total nonstarter for the tea party wing of the GOP, which since it first came to prominence in 2010 had made debt ceiling votes one of its biggest political litmus tests.
The GOP's solution to this dilemma was disgraceful. Instead of taking a political bullet and voting either for or against the debt ceiling, it came up with a scheme that allowed them to do neither. Rather than actually increase the debt ceiling and incur the wrath of their base, House Republicans brought a bill to the floor that required the federal debt ceiling to be iGNORED, that is, the Treasury could borrow whatever amounts it needed to cover its cash needs without any restrictions.
Then on May 19, without an additional vote and, therefore, with no member of the House or Senate having to go on record, the official federal debt ceiling would be raised to the amount the government had actually borrowed over the previous four-plus months. At that point, with the debt ceiling reached, the Treasury again would start to impose the so-called extraordinary measures and the countdown to the next debt ceiling crisis would begin.
At best, the federal debt ceiling is an anachronism, a vestigial organ of the federal budget process that should be eliminated. The actual borrowing needs are determined when legislation is enacted that changes either the amount the government spends or raises in revenues. Increases in the debt ceiling should be part of those bills rather than separate decisions and no member of Congress should be able to vote for a tax cut or spending increase unless he or she agrees at the same time to raise the debt ceiling to accommodate that choice.
But unless and until members of Congress and the White House have to face their constituents for agreeing to eliminate the debt ceiling, they should not be able to allow it to be ignored without taking responsibility for their actions.
The ultimate irony here is that congressional Republicans have been complaining about Senate Democrats not producing a budget between 2009 and 2012. That's certainly true; Senate Democrats found the votes in favor of a congressional budget resolution with high deficits very politically difficult and decided that the better course of action was to ignore the requirement.
But now the same people on Capital Hill who relentlessly have castigated Democrats for ignoring their budget resolution responsibilities are the ones that authored the completely analogous procedure for the federal debt ceiling.
That makes May 19, 2013, one of the most egregious abrogations of legislative responsibility in U.S. history.
There was a time when a $200+ billion reduction in the federal budget deficit would have been big news and hailed as a singular achievement worthy of either fiscal sainthood or a dance-on-the-table party...or both.
Yet yesterday's Congressional Budget Office report showing that the fiscal 2013 federal deficit will be $642 billion, $203 billion less than CBO's previous estimate of $845 billion, did not create any spontaneous cannonizations or celebrations. It also didn't change the still-stalemated and crisis-oriented federal budget debate by even a small amount.
The bottomline: It's in almost no one's interest to be happy about the budget news that should have made everyone happier.
1. The $642 billion estimate is indeed an overwhelming reduction from the 2009 $1.4 deficit and a substantial change from CBO's February projection. But it is also $642 billion more than no deficit at all. That means that all sides in the budget debate will still be able to use even this much lower number to "prove" whatever point they were making before the new estimate was released.
2. The White House couldn't take a victory lap because anything it said would have been mischaracterized by congressional Republicans as the president supporting a $600+ billion deficit.
3. Even though they could take some credit for keeping the sequester in place and, therefore, lowering spending, the congressional Republican leadership couldn't take a victory lap because that would have been taken by some tea partiers as an indication that the speaker and majority leader were not going to demand additional reductions.
4. There's anything but universal agreement among economists that reducing the deficit in the current economic environment is the right fiscal policy and, therefore, that the reduction in the deficit is good news. Given the still-slow corporate and consumer spending, the continuing cutbacks by state and local governments and the continuing economic problems around the word that are limiting trade with the U.S., Americas austerity-like fiscal policy that has been in place for several years may well be the exact wrong plan at this time.
5. The year-by-year deficit is quickly being replaced by the national debt as the number one fiscal issue. This isn't surprising: the deficit is falling while the debt is rising and the deficit is in billions while the debt is in trillions. The fact that CBO projects the debt will soon be in a range that most economists would call insignificant makes no difference when the multi-trillion dollar debt sounds so scary.
6. In the wake of the report, the deficit hawk groups are still saying that the deficit is as much of a problem as it was before and pushing for a grand bargain. This too isn't a surprise. After all, these groups would have less reason for being and far less ability to raise funds if the deficit didn't exist as an issue.
7. Although the CBO forecasts show the deficit falling from 2013 to 2015, it also shows it rising in nominal terms each year thereafter. Even though that is far less meaningful than the deficit as a percent of GDP, which stays in the low 3.5 percent range, it still allows everyone to cherrypick the results that best "prove" what they want to say.
So...Do the new CBO numbers mean that there won't be a fight this fall over the debt ceiling and a continuing resolution? Absolutely not.