Reconciliation for Debt Limit Double-Edged Sword for GOP

By Jonathan Nicholson

The need to keep the Treasury Department from defaulting on its debt coupled with a desire to force spending changes could lead Republicans to use budget reconciliation to boost the debt limit. But that route has its own potential procedural pitfall.

If Republicans go the reconciliation route—the same pathway they chose for health care and will likely choose for a tax overhaul—they could see themselves forced to go on record as voting for more than $1 trillion in new federal debt, something they have so far not done since 2011.

It may be some time before GOP leaders have to make a decision. Treasury Secretary Steven Mnuchin and House Speaker Paul Ryan (R-Wis.) have said Treasury’s borrowing room should be extended before Congress leaves for a five-week August break, but outside observers have said the “drop-dead” date for the debt limit is unlikely to be reached before October.

Asked June 6 about the debt limit, Senate Majority Whip John Cornyn (R-Texas) told Bloomberg BNA: “There hasn’t been any discussion of using reconciliation for that, but we are going to tackle it.”

‘Back-Door Tool’

To provide a debt limit bill with reconciliation, Republicans would need to get a budget resolution for fiscal year 2018 adopted in both chambers.

With President Donald Trump’s budget released May 23, lawmakers hope to turn to writing that resolution soon, but a spate of outstanding issues, including spending levels for appropriations, remain to be resolved.

The lure of using reconciliation for a debt limit boost is that it would remove Democratic leverage in the Senate. If paired with spending cuts or budget process changes, Republicans could use it as a vehicle to make major changes in the scope of government without having to worry about a Democratic filibuster in the Senate, the same path they have taken repealing the Affordable Care Act and are likely to take on a tax system overhaul.

In the past, Republicans have been wary of using reconciliation to boost the debt limit, but now some quarters appear interested as long as the boost is linked with spending cuts. A provision in the FY 2016 budget resolution, the first one adopted since Republicans took control of both chambers after the 2014 elections, specifically prohibited the tactic. The provision has since lapsed.

In 2013, Sens. Mike Lee (R-Utah), Ted Cruz (R-Texas), and Rand Paul (R-Ky.) wrote a letter to then-Senate Majority Leader Harry Reid (D-Nev.) warning him against trying to use reconciliation to increase the limit.

“We have no objection to proceeding to conference if the leader is willing to agree not to use it as a back-door tool to raise taxes or the debt ceiling,” the trio wrote. “We should not be complicit in digging this nation even further into debt on merely a 50-vote threshold.”

What Reforms Included?

Conn Carroll, Lee’s communications director, told Bloomberg BNA June 6 that Lee has not changed his position but is open to using reconciliation if the debt limit is linked with other things.

“Reconciliation is just a process. The issue is what reforms are paired with the debt limit increase, whether that increase happens through reconciliation or standalone legislation,” Carroll said in an email.

Such a linkage could also have support from groups that have often fought for less federal spending. Dan Holler, vice president of Heritage Action for America, said in an email that conservatives need to ensure Democrats are unable to take the debt limit hostage and leverage it.

While he said Heritage Action has taken no position on debt limit reconciliation specifically, “it would certainly allow a debt limit increase to move in tandem with more conservative priorities.”

Onus on GOP

Democrats, for their part, appear fine with demanding a “clean” debt limit with nothing linked to it or seeing it pass with Republican-only support.

“The onus on debt limit is on our Republican colleagues. They control the presidency. They control the House. They control the Senate,” Senate Minority Leader Charles Schumer (D-N.Y.) told reporters June 6.

To get past the 2018 midterm elections, a boost of more than $1 trillion in the debt limit would be required, according to debt projections in the Trump budget and the Congressional Budget Office. In the Trump budget, a debt limit boost of $1.286 trillion would be needed to get through September 30, 2018, a few weeks before the midterm elections.

Unlike previous extensions of borrowing authority, a debt limit boost via reconciliation would likely force Republicans to go on record favoring that higher level of debt, something they have technically been able to avoid in extensions of Treasury’s borrowing authority since 2011.

That’s because those extensions since 2011 have actually been temporary suspensions of the debt limit, not increases. The last suspension expired in mid-March, though Treasury has been able to take accounting moves to stay below the limit for a while. But that would change under reconciliation.

Doesn’t Fit Format

Reconciliation instructions in budget resolutions have historically only applied to levels or changes in revenues, outlays, deficits or the debt ceiling. For example, the instructions that led to the writing of the ACA repeal bill told several committees to find $1 billion apiece over 10 years in deficit reduction.

But that format may not work for another debt limit suspension. Steve Bell, senior adviser at the Bipartisan Policy Center, said reconciliation had never been used for a debt limit suspension and it would be up to the Senate Parliamentarian whether it could be.

“My gut tells me, no, you couldn’t do it,” said Bell, a former staff director of the Senate Budget Committee. “That just doesn’t fit the format of reconciliation.”

To contact the reporter on this story: Jonathan Nicholson in Washington at jnicholson@bna.com

To contact the editor responsible for this story: Paul Hendrie at pHendrie@bna.com

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