A debt limit deal with something for everyone

Unified Democratic control of Congress and the White House ends in less than 50 days. Even so, rumors are that they may use the dwindling time to address next year’s debt limit deadline early. 

The one-party-rule path — a gimmicky budget resolution to ram through a debt limit increase using reconciliation — would inflame partisan passions and consume loads of precious floor time. 

A bipartisan deal, however, could give most members of both parties much of what they want while making Congress work better going forward. 

Most Democrats and some Republicans don’t like the debt limit. The Government Accountability Office has said that the debt limit “does not restrict Congress’ ability to pass spending and revenue legislation that affects the level of debt.” Yet the debt limit has facilitated many substantial budget reforms. 

Most Republicans and many Democrats want rules-based fiscal responsibility. In June 2020, 30 House Republicans and 30 House Democrats sent a letter to House leaders seeking “a process for establishing overall budgetary goals—such as debt-to-GDP targets—that would reduce debt-limit brinkmanship as long as the budget remains on a responsible path.” 

Moreover, members of both parties rallied around preventing government shutdowns with automatic continuing resolutions (“auto CR,” see Table 1 here) during the nation’s longest-ever, 35-day shutdown from December 2018 to January 2019. Wisconsin, North Carolina, and Rhode Island already do this. 

In June 2019, the Senate Homeland Security and Governmental Affairs Committee approved Sens. James Lankford’s (R-Okla.) and Maggie Hassan’s (D-N.H.) Prevent Government Shutdowns Act with the support of Republican Sens. Ron Johnson (Wis.), Lankford, Mitt Romney (Utah), Rick Scott (Fla.), Mike Enzi (Wyo.), Josh Hawley (Mo.) and Democratic Rep. Gary Peters (Calif.), Sens. Hassan, Kyrsten Sinema (Ariz.), and Jacky Rosen (Nev.). Sens. Tom Carper (D-Del.) and Kamala Harris (D-Calif.) would have supported had they been present. Only Sens. Rand Paul (R-Ky.) and Rob Portman (R-Ohio) opposed, but each has introduced similar legislation.

And why not prevent shutdowns? Congress already went halfway there with the Government Employee Fair Treatment Act of 2019, enacted on Jan. 16, 2019. Congress never intended for shutdowns to be possible — they only began after an executive branch ruling from the Carter administration. 

A good debt limit deal could take two recurring crisis points off the table in exchange for reasonable budget targets. An automatic continuing resolution would keep the government from shutting down, thus avoiding disruption and helping the appropriations process conclude more smoothly. The debt limit could be suspended indefinitely as long as the budget follows broad, neutral budget targets. 

But what kind of budget targets could work? The Responsible Budget Targets Act (RBTA) proposed by Sen. Mike Braun (R-Ind.) and Rep. Tom Emmer (R-Minn.) is the clear frontrunner. Many other attempts have failed, and many other proposals would fail if tried, as I discussed in a recent paper. The RBTA is a kind of balance, which is easier to explain than debt-to-GDP targets. 

The Emmer-Braun bill would set annual spending targets based on prior spending and adjusted for GDP growth, recent deficits or surpluses, and changes to revenue. It would allow immediate emergency spending while requiring offsets in subsequent fiscal years. It’s a neutral rule that would phase out primary deficits (excluding interest) while letting the normal political process determine the precise mix of spending restraint and revenue. 

Their proposal echoes Switzerland’s successful “debt brake:” spending and revenue balance in the medium term, not every year. In addition, RBTA’s focus on primary balance excludes interest costs and is far more realistic than full balance. The RBTA also bears some similarity to a “business cycle balanced budget amendment” that once counted 45 Republican and 14 Democratic cosponsors, from across the political spectrum. 

Suspending the debt limit when the budget meets RBTA targets is win-win. A responsible Congress would face no risk of a debt default. The desire to avoid a debt limit fight and possibly accidental default would encourage Congress to stay on target. Even if the budget gets off track, what’s needed to get back on would be clear. The auto CR reduces government funding brinkmanship and helps the annual budget and appropriations process finish within the proper bounds and more on time than has been the case for a generation. 

These deals don’t make themselves. Members of both parties must seize the moment to take our country toward a more coherent, effective way of budgeting. Other upgrades are needed as well, but reasonable budget targets, preventing shutdowns, and ending the debt limit threat would be a substantial first step. 

Kurt Couchman is senior fellow in fiscal policy at Americans for Prosperity.