GMF - The German Marshall Fund of the United States - Strengthening Transatlantic Cooperation

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Fixing a Broken Political System

It’s not enough to eventually do the right thing. Congress needs to stop doing the wrong things first.

“You can always count on Americans to do the right thing—after they’ve tried everything else,” has been, without a doubt, the most oft-repeated aphorism inside the Beltway during the recent, drawn-out debt-ceiling debacle. This phrase was repeated mantra-like by Washingtonians to reassure themselves that, in the end, the suicidal flirtation with national default would end in triumph, not tragedy.

There are just two things wrong with this infamous quotation attributed to that polymath quipster Winston Churchill. First, the quote is apocryphal. There is no evidence the former British prime minister ever made this cynical-yet-flattering observation about his American cousins. Second, the remark implies that getting it right in the end wipes the slate clean of all the costs incurred by doing the wrong things first.

The sighs of relief both at home and abroad over Washington’s last-minute default-avoidance do not change a stark reality: The debt-ceiling fiasco exposed profound structural shortcomings in congressional economic decision-making. Unless these problems are fixed, America is doomed to repeat the recent national nightmare.

The debt ceiling was created in 1917 so that members of Congress could periodically demonstrate their fealty to fiscal forbearance. It has been a long-ticking time bomb that, because it never blew up, lulled Americans into thinking it was benign. The last few weeks irrefutably demonstrated that the debt ceiling endangers the economy. And political gamesmanship around raising it can distract the national discourse from more important issues—such as jobs and economic growth—while hobbling the legislative process. The debt ceiling should be abolished. If that proves politically impossible, then the president should be given permanent authority to raise the limit subject to a two-thirds disapproval vote by Congress.

The July 29 filibuster of Senate Majority Leader Harry Reid’s debt-ceiling proposal needlessly dragged out the recent debate, delaying action long enough to drive down stock markets during the final week of brinksmanship.

The filibuster, once a tool to allow a minority to be heard, has become an insidious instrument enabling the current GOP minority to tie the Senate in knots. And why wouldn’t the Democrats use the filibuster even more if they end up in the minority in 2013?

The filibuster today makes tax increases a nonstarter in the Senate. It could make cuts in social safety-net programs off limits in the next Congress. At the very least, spending and revenue legislation—the very essence of governance—should be filibuster-proof, subject to simple majority votes.

In the years leading up to the debt-ceiling crisis, Congress has repeatedly demonstrated its inability to pass budgets that balance spending and revenue. It has proven too easy to raise outlays and too hard to raise taxes.

The solution is not a balanced-budget amendment. The current proposed version has no exemption for economic downturns, so it would force spending cutbacks just as revenues are declining—a prescription for recession. As our experience during the recent financial crisis demonstrated, the economy needs a spender of last resort. Without the government’s 2009 stimulus package, the Congressional Budget Office estimates, the current unemployment rate could have been as high as 11 percent.

At the very least, a balanced-budget amendment should require budgetary balance over the business cycle, as a recent amendment to the German Constitution prescribes. A less risky approach would be a return to true Clinton-era rules, which forced Congress to pay for both new spending increases and new tax cuts with either spending cuts or tax increases in other areas. Nothing should ever be off the table.

Reform of congressional procedures that shape debate over debt and deficits can never be achieved piecemeal. Just as Congress has agreed to create a special committee to come up with specific spending and revenue proposals, it should also create a select group to streamline the economic decision-making process.

In 1974, Congress enacted a sweeping reorganization of its budget procedures. The Congressional Budget and Impoundment Control Act created new deadlines for review of revenues and expenditures as well as new budget committees to manage this process, and it established the nonpartisan CBO as the official scorekeeper. Recent difficulties passing annual budgets—and now this debt-ceiling fight—are ample evidence that additional reforms are needed.

Such reform will face opposition. It would not be worth trying unless both sides of the aisle agree on at least three principles: that budgetary legislation must move through Congress in a timely fashion (financial markets move much faster now than they did in 1974); outlays and revenue are both in play at all times and subject to the same majority vote; and U.S. debt should be no higher than some target, say 60 percent of the gross domestic product, by a date certain.

A business-as-usual approach would be much easier. But that led to legislative dysfunction and an unprecedented decline in public approval of Congress. The lesson of the debt-ceiling crisis is that Congress needs to heal itself.