September 7, 2017

The Art of the Debt-Ceiling Deal

Trump’s deal with the Democrat leadership is all part of the game of chess, but it sure doesn’t seem helpful.

Republicans already have their work cut out for them this fall in trying to salvage what has largely been a disappointing year. Failure to repeal and replace ObamaCare and the shrinking promise of tax reform have left little confidence in the majority party’s ability to govern. The debt-ceiling deal President Donald Trump cut with the Democrat leadership Wednesday is all part of the game of chess, but it sure doesn’t seem helpful.

Trump agreed with Senate Minority Leader Chuck Schumer and House Minority Leader Nancy Pelosi to fund the government for just three months and temporarily raise the debt ceiling, which is due to reach its limit on September 30. Republican leaders wanted an extension through the 2018 election with fiscal reforms attached. Then Trump invited vulnerable Democrat Sen. Heidi Heitkamp to ride Air Force One and campaign with him in North Dakota.

According to leftist Politico, “Republicans left the Oval Office Wednesday stunned,” while “Democrats were gleeful.” Understandable.

Trump’s flip-flop on the debt ceiling goes against his campaign promise to bring an end to the fiscal chaos that has left the government with a $20 trillion debt. It also puts into jeopardy any leverage Republicans had in crafting a long-term debt solution and pushing the remainder of their legislative agenda for 2017. The Wall Street Journal explains, “Republicans will now have to take at least two difficult votes to raise the debt ceiling, while Democratic leverage will increase when the day of reckoning comes.”

As if GOP leadership needed another excuse to fail.

We say this is a game of chess because Trump almost surely made this debt deal with Democrats for strategic reasons far beyond the question of extending the ceiling for three months, six months, or 18 months. The media is stuck playing checkers. The GOP has failed to push through various priorities, and Trump may be calculating he’s going to need Democrat help — or at least less opposition.

House and Senate Republicans have about 60 days left in the session to deliver on a list of proposals that even optimistic policy watchers say is unlikely to happen. Tax reform, hurricane relief, immigration and a whole host of appropriations bills are at the top of the list.

A nearly $8 billion relief package for Hurricane Harvey victims cleared Congress Wednesday, with a promise of more money to follow now that Hurricane Irma is bearing down on Florida.

Tax reform will have a more difficult path. Trump has offered little guidance on what the tax package might look like, and Republican lawmakers have yet to agree on a proposal that will offset much-needed tax cuts for individual and corporate earners with spending cuts. Mark Zandi, a top economist with Moody’s Analytics, noted that there is little expectation in the markets that any meaningful reform will happen. “There’s no evidence that investors or anyone else are expecting any kind of tax reform or tax relief,” he said.

Again, Republicans had hoped to use the impending debt ceiling as an opportunity to push for broader tax relief and impose spending reforms that break the seemingly endless cycle of last-minute spending measures and debt-ceiling hikes that keep the government running. The recurring drama of avoiding default and the addiction to short-term spending resolutions have kept Congress from passing comprehensive budgets for years. It has also led to bad fiscal management in Washington, where lawmakers can never seem to look beyond the next stopgap measure. It was hoped that Trump’s tough talk on getting the government’s fiscal house in order would lead to a plan that would bring an end to this madness. His deal with “Chuck and Nancy,” as he jovially referred to the Democrat leadership Wednesday, indicates otherwise.

Trump further weakened the Republican position by leaving the door open with Democrats for DACA legislation later in the year. When he rescinded Barack Obama’s executive order earlier this week, Trump left the door open for Congress to come up with a permanent solution to the issue of so-called “Dreamers.” But his chumminess with Democrats Wednesday indicated he was willing to accept a solution that did not include any enforcement provision. This was welcome news to the open-borders crowd; disheartening news for anyone seeking meaningful immigration reform.

All is not lost for Republicans, and, notwithstanding the ObamaCare failure, they should not be viewed as having completely fumbled their opportunities for 2017. There have been some bright spots, including confirmation of Neil Gorsuch to the Supreme Court and the rolling back of several Obama executive actions that will save Americans billions of dollars in regulatory costs.

These small victories will mean little, however, unless Trump and congressional Republicans can put together meaningful budget reforms. Instead of buddying up with tax-and-spend Democrats, Trump should repair his frayed relations with House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell. Together they can bring sanity to Washington’s rudderless fiscal policy and make a lasting impact that will boost the Republican agenda and, thus, the country.

Just for the record, we’ll give the last word to Ted Cruz, who had this to say on the campaign trail in 2016: “If as a voter, you think what we need is more Republicans in Washington to cut a deal with … Nancy Pelosi and Chuck Schumer, then I guess Donald Trump is your guy.”

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