House Republicans said last week that they were planning to bring up a “clean” debt ceiling bill for a vote, possibly as early as this week. A “clean” bill is an increase in the amount the government is allowed to borrow without deficit reduction measures or other provisions. It’s what Majority Leader Eric Cantor (R-Va.) said a month or so ago he would do but then backed off when he was warned that its rejection could roil financial markets. It’s also the same bill demanded by Rep. Peter Welch (Vt.) and more than 100 other Democrats who say it’s the right way to proceed.
In today’s world of sound bites and spin, it’s hard to argue with the name. After all, a clean debt ceiling bill seems to belong to a long list of things that are generally assumed to be on the side of the angels such as clean coal technology, the clean margins surgeons hope for when they examine a cancer patient and the clean plate club our moms used to tell us about. But in the current debate, a clean debt ceiling bill has a number of dark meanings and foreboding implications that make it less than totally benign and completely desirable.
It’s no secret that House Republicans plan to bring the bill to a vote because they want it to fail. Their goal is for the bill to be voted down by a wide margin so they can claim there’s no support for increasing the debt ceiling without substantial deficit reductions.
But the claim will actually be an extraordinary fallacy because a debt ceiling increase that includes deficit reductions is just as likely to be rejected. Some Representatives would vote against it just because it would increase the government’s borrowing limit, others would oppose it because of the specific spending cuts and revenue increases, and others would vote “no” because they want deeper deficit reduction. In other words — and completely contrary to the demagoguery, spin and hyperbole that will be used when the debate is over and the clean bill has failed — it’s not at all certain that a big “no” vote for a clean debt ceiling increase means that the opposite is true and a majority is clamoring for an increase that includes deficit reductions.
Demonstrating that there’s little support for a bill that doesn’t include deficit reductions is not the only — and possibly not even the most important — reason the GOP leadership wants to hold the vote. The leadership may have finally realized that, with polls showing a substantial majority of Americans opposing an increase in the borrowing limit, many House Members — especially middle-of-the-road Republicans — have to be given a chance to vote against the bill now so they will be able to vote for it later. A “no” vote this week — about two months before the Treasury says the government’s cash position will become critical — would allow Representatives to validate their anti-debt-increase credentials for the folks back home but still give financial markets time to recover if they react negatively. Putting that vote on the record should also make it easier for some lawmakers to support an increase in the debt ceiling in late July or early August and, therefore, for a bill to be passed.
Many Members publicly insist that a big “no” vote on a clean bill will have little to no effect on financial markets. But here’s another dirty little secret: There is a growing suspicion that, like what happened the day after the House rejected the Troubled Asset Relief Program in September 2008 and the Dow Jones Industrial Average fell by almost 7 percent, such a vote could quickly change market perceptions of the situation and have a substantial negative effect on interest rates and equity prices.
It’s even possible that’s part of the plan. Former Office of Management and Budget Director Peter Orszag said last week that it is going to be difficult to get Members of Congress to agree to increase the debt ceiling without some kind of “turbulence” in the bond market. A big “no” vote on a debt ceiling increase bill could easily accelerate that type of disturbance in the financial force. Indeed, it might be what’s needed to precipitate it and the leadership may be counting on that happening.
But the most interesting dirty secret is that a “clean” bill sounds so wholesome, pure and valuable that some folks back home may assume it would be wrong for their Member of Congress to oppose it. This is not as far-fetched as it seems. Until the housing crisis became front-page news, a subprime loan, which is now generally considered to be less than desirable, was thought to be a good thing by a substantial percentage of the country because, they assumed, it meant that they were borrowing at an interest rate that was less than prime. If the political theater involved with bringing a clean bill to the House floor isn’t well understood, the scheme of bringing it up for a vote so it can fail could easily backfire.