House GOP seeks to win by losing on the debt ceiling

In one nimble move, House Republicans on Friday appear to have extricated themselves from a self-made political trap that threatened the U.S. economy -- and their hold on the House.

The trap was the hard-line position many House Republicans had taken on raising the debt ceiling. I’ve written repeatedly about how hard it is to defend not raising the borrowing limit, regardless of how strongly you feel about the mounting U.S. debt. To put it simply, the time to exercise fiscal discipline is when Congress is pulling out the federal credit card, not when the bill comes due. And it’s dangerously foolish to assume that investors won’t react badly if the federal government stiffs only some of its creditors, as some in the GOP (and many of the commenters on this site) contend.

On Friday, House GOP leaders announced at the end of a three-day confab that they will bring a bill to the floor next week to raise the debt ceiling enough to cover three months’ worth of government operations. The move, if endorsed by the Senate and signed by President Obama, wouldn’t end the all-consuming debate in Washington over spending. But it would place the fight in a much different context.

The government faces two major fiscal deadlines within the next thee months. On March 1, more than $100 billion in across-the-board spending cuts are scheduled to go into effect automatically unless Congress intervenes. And on March 27, a six-month funding bill for the federal government expires, potentially forcing all nonessential government operations to cease the next day.

The House proposal would shift the debt-limit debate to the back of that queue. Suddenly, House Republicans would no longer be in a position of taking the debt limit (and, by extension, Washington’s credit rating and potentially the whole U.S. economy) hostage in their attempt to force Democrats to accept cuts to costly federal benefit programs. They’d be threatening instead to shut down the government if they don’t get their way on entitlements and the deficit.

Naturally, House Democrats disparaged the proposal.

“The House Republican plan fails to give American families, small businesses and economic markets the certainty needed to boost economic growth,” said Rep. Chris Van Hollen (D-Md.), the top Democrat on the House Budget Committee. “This is also a thinly veiled attempt to gain political leverage at the expense of the economy. It will merely reinforce the idea that Washington cannot act responsibly when it comes to our financial obligations.”

Yes to all of the above, but it’s still a smart thing for the GOP to do. Avoiding a fight over the debt ceiling means Republicans won’t have to explain away the hypocrisy of opposing a higher debt limit after twice voting for GOP budgets that would increase the debt by trillions of dollars. And the three-month extension enables them to continue using the debt limit as a bargaining chip as the budget talks shift to somewhat safer (and clearly more appropriate) ground.

Granted, the leverage the GOP plans to use -- the threat of ill-conceived across-the board cuts that could weaken the economy, combined with the possibility that large swaths of the federal government would shut down -- carries its own risks. The public reacts badly to government shutdowns; it’s a worrisome sign that they put a bunch of incompetents in office.

Another problem is how ill-prepared the House is to do anything substantive about entitlements. For all the talk from House Republicans about how un-serious President Obama and congressional Democrats have been about reining in Medicare and Medicaid, they have yet to move any bills to implement structural reforms. In fact, they’ve held only one hearing on the notion of shifting Medicare to a “premium support” model, which is the major reform suggested by House Budget Committee Paul Ryan (R-Wis.), and no hearings on the proposal to turn Medicaid into a block-grant program.

Nevertheless, House Republicans will be in a much better place with a three-month extension of the debt limit than they are today, mainly because they’ll be wielding leverage they can actually use. Taking a partial default off the table also means that Republicans may be able to keep the public’s focus on the spending cuts they want to make rather than having to continually defend the game of chicken they were playing with the economy (a hat-tip to The Times’ editorial page editor, Nick Goldberg, on that point).

Best of all for the GOP, Democrats may now find themselves in the more politically untenable spot. As Republicans push for cuts to domestic spending programs and entitlements, Democrats will try to replace some of those cuts with tax increases. Republicans will resist, pointing out that Congress already raised taxes in the deal struck at the beginning of the year with Vice President Joe Biden. If an impasse ensues and the government is shut down, the public may be more sympathetic to the GOP than it was in December, when the party’s determination to protect high-income Americans from a tax increase threatened to raise everyone’s tax bill.

It took a three-day retreat for House Republicans to find their way out of the debt-ceiling cul de sac, but they’ve apparently decided that there are better routes to spending cuts than one that might wreck the economy. And for that, we can all be thankful.

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