The new House Democratic majority will work quickly to makes changes in how the Chamber operates, and one way they will do so is to reinstitute the Gephardt Rule, which will make it easier for them to raise the Federal debt limit. However, as much as they are making it easier on themselves, they will still need to work with the Republican-controlled Senate and President Trump to increase the debt limit.
Congress is constitutionally required to approve the Federal Government’s acquisition of debt, as Article I, section 8 of the U.S. Constitution gives Congress the power to “borrow Money on the credit of the United States.” For about a century, the government has regulated the process for approving and acquiring debt by the Federal debt limit (also called a debt ceiling). As the name suggests, the debt limit is a cap on how much the Federal Government may owe lenders. With this congressionally approved cap in place, the Treasury Department may sell bonds to the public at will until they reach the limit. If the limit were not in place, the Secretary of the Treasury would have to ask Congress to pass a law approving the sale of bonds whenever they were needed. Today, Congress only needs to raise the debt ceiling once the debt reaches the limit.
Naturally, voting to raise the debt limit is not a popular task for Members of Congress, who never want to be seen as fiscally irresponsible. (That being said, not approving a needed debt limit increase would also be fiscally irresponsible since the Government defaulting on loans would have severe negative repercussions felt throughout the world economy.) Traditionally, the majority party votes in favor of debt limit increases, and the minority party votes against it, trading scripts whenever power changes hands to criticize their opponents for fiscally reckless policies. Additionally, voting to raise the debt ceiling takes time away from other legislative priorities. To reduce the headaches of these votes, the House has simplified the process by instituting, from time to time, a rule, known as the “Gephardt Rule” after its creator, Representative Dick Gephardt of Missouri. According to this rule, if the budget resolution specifies that the country should carry a debt that differs from what the debt limit is at the time, when the budget resolution is adopted, the House effectively “deems” the increase by adopting a joint resolution to change the debt limit at the same time.
The Gephardt Rule first applied to calendar year 1980. Since then, it has been repealed or suspended and reinserted in the House rules a number of times. When the Republicans took control of the House in 2011, they repealed the rule. As we explained in a previous post, the Republicans believed voters expected them to reduce the Federal debt, and incoming Speaker John Boehner established a principle that for every dollar the debt ceiling needed to be increased, the deficit needed to be trimmed by the same amount. Votes on the debt ceiling were seen as a way to give them leverage over President Barack Obama and the Democratic-controlled Senate—a tactic that many criticized, since it raises the specter that the Government will default on its debts, an event that economists beg the Government to avoid. (Other countries grapple with the problem of large public debts, too. But America and Denmark are the only two developed countries with debt ceilings as we know them. And in Denmark, parliament sets the limit high enough that it would not be a political tool to be used against themselves.)
Now that the Democrats are taking control of the House once again, the Gephardt Rule will be included in the House rules. However, the new version will operate differently. Traditionally, the Gephardt Rule required that spin-off joint resolution raising the debt limit be raised by a specified amount. With its current iteration, the rule suspends the debt ceiling for the fiscal year that the budget resolution covers. In effect, the suspension of the debt ceiling means the Treasury Department could acquire as much debt as it deemed appropriate until the end of the fiscal year. Suspending the debt ceiling, rather than setting a specific ceiling, is a common enough practice, and this version of the Gephardt Rules seems like it will make the practice the default.
The reintroduction of the Gephardt Rule makes life a little easier for the House majority, since it means they can eliminate at least one step in raising the debt ceiling. However, they still need to contend with debt ceiling politics, since the Senate (which does not have a comparable rule, by the way) must also approve any increase in the debt limit. This means the House Democrats may still have to negotiate with the Senate Republicans. According to a Congressional Research Service report on the Gephardt Rule, there have been 15 spin-off joint resolutions that became law, and the Senate approved 10 of these without any change. For the other five, the House had to vote again. Even with the Gephardt Rule in place, it is possible that the House Democrats will have to hold a separate vote on the debt ceiling, especially if the Senate Republicans prefer to raise the debt ceiling by only a certain amount, rather than suspend the limit entirely. Additionally, they will need to secure the cooperation of President Trump, who must sign off on any debt ceiling increase.
Since the House Democrats still need to negotiate with Republicans over the debt limit increase, it is likely the Gephardt Rule will not change the debt ceiling politics significantly. But, we’ve also had nearly a decade of zero percent interest rates. With trillion-dollar annual deficits projected for the next several years, and interest rates starting to increase, the cost of government borrowing will start to spiral upwards. As the saying goes, “you can run, but you cannot hide.” No matter how invisible the process, the issue of Federal borrowing will still need to be addressed.
Mark Strand is the President of the Congressional Institute and Timothy Lang is a research director. The Sausage Factory blog is a Congressional Institute project dedicated to explaining parliamentary procedure, Congressional politics, and other issues pertaining to the Legislative Branch.