The following editorial appears on Bloomberg View:
Now that the United States has narrowly avoided a disastrous default on its government obligations, its political class faces the much more difficult task of repairing the country’s reputation and restoring some modicum of trust between its two dominant parties.
Here’s a suggestion: Republicans and Democrats should start talks on debt-ceiling disarmament.
Congress’s last-minute agreement to fund the government and raise the debt ceiling serves only to postpone, not eliminate, the threat that political dysfunction will kill the recovery and trigger a global financial crisis. The creditworthiness of the U.S. government, issuer of the world’s safe-harbor currency, is still in the balance. Government funding runs out Jan. 15, and the debt ceiling will become binding again sometime in the first half of 2014.
At the same time, the failure of radical Republicans to achieve their goals in the latest standoff has demonstrated that holding the country (and the world) hostage is a losing strategy. Both parties ought to acknowledge that refusing to raise the debt ceiling is a weapon of self-destruction. Disarming this suicide bomb is in everyone’s best interest.
The ideal solution would be to eliminate the debt ceiling completely. Congress has the power to set the government’s budget, and create or eliminate deficits, through its tax and spending laws. It does not need – and should not want – the opportunity to renege on those decisions at enormous cost to the country by limiting the Treasury’s ability to borrow.
That said, disarmament in any context of extreme antagonism is difficult. Sometimes it has to be done in stages, with small first steps to establish trust. One such move would be an agreement to make debt-ceiling standoffs less frequent. Congress could craft a bill requiring that the ceiling always be raised enough to cover borrowing for, say, two more years. Limiting the number of debt-ceiling debates to one per congressional term might seem laughably unambitious – but it would be better than the present arrangement.
Another step would be to ensure that hitting the debt ceiling won’t cause a default on Treasury bonds. This would require two things. First, Congress would permanently authorize the Treasury to borrow what’s necessary to service its capital- market debt, regardless of the debt ceiling. Second, Congress would order the Treasury to update its payment systems so that bond payments could be separated from the rest and provide sufficient funding to do so.
Most promising may be an idea first floated by Senate Minority Leader Mitch McConnell. Essentially, this would allow the president to raise the debt ceiling, with conditions and subject to congressional approval: If Congress voted against the increase, the president could then veto that action, and a supermajority of Congress would have to override his veto.
Again, in one way, it’s laughable, the kind of maneuver that invites derision outside Washington. Yet it gives the Republicans something they want – blame for rising debt would lie more squarely with the White House – while, in effect, removing the threat of default almost entirely. Even traditional ideological (and journalistic) foes support the idea.
These would be small and far-from-elegant steps, judged against the intelligent alternative of simply scrapping the debt-ceiling bomb once and for all. But this is Washington, where the realm of the possible is narrow. Partial disarmament of this suicide weapon is better than none.