Jonathan Chait

How Clinton Foiled Debt Ceiling Extortion

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If you haven't already read Kara Brandeisky's story about how the Clinton administration handled the debt ceiling in 1995, you should definitely do it. As she notes, the circumstances were different in 1995. Republicans were somewhat less fixated on the debt ceiling, and also somewhat less destructive and crazy. But they weren't that much less destructive and crazy:

“Nobody should assume we’re going to have a debt-limit extension,” John Boehner warned. “If the vote were held today, it would not pass.” Sound familiar? This was Boehner in November of 1995, when he was the House Republican Conference chairman and his party was refusing to raise the debt ceiling unless President Bill Clinton agreed to a package of sweeping spending cuts.

The biggest single difference is that the Clinton administration simply refused on principle to get jacked up on the debt ceiling:

Still, even though Clinton enjoyed political and economic advantages that Obama does not, his no-compromises strategy had some clear advantages. Unlike Obama, he refused to let the threat of default set the national agenda. Because he would not enter into negotiations over the debt ceiling, the issue barely roused the public consciousness. On November 9, 1995, a senior administration official told the Washington Post, “Our position is it does not matter what they put on this legislation, we are not going to accept anything but clean bills because we will not be blackmailed over default. Get it? No extortion. No blackmail. What you hear are their screams of complaint as they realize we are not, not, not budging on this.”

Kind of hard to imagine somebody from this administration talking like that.

It's worth noting that the implications of this capitulation go beyond the current deal, which is not that terrible. Republicans are emboldened that they have set a new precedent for using the debt ceiling to extract concessions (it "establishes a pattern for when the debt limit expires in 2013," exults Keith Hennessey.) This would have dire consequences, writes Robert Greenstein:

Anticipating the policy battles to come, we should not lose sight of an alarming development. Those who have engaged in hostage-taking threatening the economy and the full faith and credit of the U.S. Treasury to get their way will conclude that their strategy worked. They will feel emboldened to pursue it again every time that we have to raise the debt limit in the future.

They also will likely continue insisting, in future hostage-taking efforts, that for every dollar we raise the debt ceiling, we must cut spending by a dollar, with no revenue allowed. When one considers that even the harsh budget plan of House Budget Committee Chairman Paul Ryan would require policymakers to raise the debt limit by nearly $9 trillion over the coming decade, one begins to understand the extraordinary results such a policy path would produce over time.

The even more serious problem as I wrote in my most recent TRB column, is the degree to which the debt ceiling represents a new era of crisis in American political institutions. We have a rickety political system that gives the opposition party power without accountability, and lacks any clear channels for resolving competing claims to legitimacy. Obama's weakness merely encourages more acts of brinkmanship, every compromise making it harder for him to make a credible public stand.

It's easy to overestimate Clinton's resolve in the golden light of history. At the time, the Clinton administration was freaked out, desperate to move to the center and highly amenable to compromise. Still, Obama needs to recognize that capitulating to economic hostage-taking creates long-term dangers -- not just to his agenda but to the health of American democracy.

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