The fiscal showdown in Washington, D.C. may be out of the headlines for now, but the issues underlying the crisis will re-emerge soon enough. Congress only voted to fund the federal government through January 15, 2014, and suspend the debt limit until February 7, after all. Still, some confusion exists about what might happen as those milestones approach. Will there be another shutdown? Will markets have to contend once again with threats of a debt ceiling breach?
54 > 46
In a recent post I outlined several reasons why I don’t think Congress will be willing to risk the country’s access to global credit markets again come February. The first has to do with votes. Republicans now have proof that Senate Democrats, who hold the majority in that house of Congress, will not budge on substantive issues (e.g., healthcare) in the face of a partial government shutdown and threat of a debt ceiling breach. As Senate Minority leader Mitch McConnell said in an interview after the crisis had ended, “It’s really a matter of simple math: 54 [votes] is more than 46.”
The meaning of the “McConnell Rule”
The second, and perhaps most poorly understood, reason Congress is unlikely to go so far next time around has to do with another potential procedural device, the so-called “McConnell Rule.” This was a provision, named after the aforementioned Sen. McConnell, added into the bill ending the October crisis. The provision stipulates that President Obama may act to borrow money to pay the nation’s obligations until February 7, and that Congress would have to pass a “disapproval” bill to stop him. Obama, of course, could veto that bill in return, and the only way Congress could stop him from borrowing would be to pass another one with a veto-proof two-thirds majority.
Importantly, the McConnell Rule is a temporary measure. It prevents a debt ceiling showdown only until February 7. After that point, Congress would have to raise the debt ceiling, or else the Treasury would once again have to resort to “extraordinary measures”—cash management techniques, such as delaying pension contributions, which delay the date on which the Treasury would run out of money.
Although the McConnell Rule is only temporary, it may have a political usefulness that allows it to live on in one form or another beyond that date. It theoretically gives Republicans, many of whom fear a primary challenge from their right flank, the opportunity to vote against raising the debt ceiling without creating the risk of a potential U.S. default. (While Democratic Senator Chuck Schumer has said he plans to introduce legislation to make the rule permanent, passage would be unlikely in the current climate.)
“There’s no education in the second kick of a mule”
The third reason another shutdown and debt ceiling debacle is unlikely this winter is the political fallout from the crisis that just ended. Republicans, who hope to recapture the Senate next year, walked away with more damage in an array of polls than either Congressional Democrats or the President—and with almost no concessions to show for it. There’s little reason for anyone to believe they’ll fare better the next time around. As Senator McConnell put it in the aftermath of the showdown, “One of my favorite sayings is an old Kentucky saying, ‘There’s no education in the second kick of a mule.’ The first kick of the mule was in 1995; the second one was the last 16 days. A government shutdown is off the table. We’re not going to do it.”
At this point, we’d be wise to take him at his word.
Past performance does not guarantee future results.