September marks the 26th anniversary of the introduction of the Gramm-Rudman-Hollings Act, the much-maligned deficit reduction process that budget historians and analysts generally consider to have failed miserably. What few people remember about that law is that it wasnít stand-alone legislation; it was an amendment offered to what was considered at the time to be an unrelated bill the Senate was debating ó an increase in the debt ceiling.
Thatís right. In 1985, increasing the debt ceiling and reducing the budget deficit were not thought to be inextricably connected. That was in spite of the soaring federal debt ó the deficit in fiscal 1985 and the projected deficit for fiscal 1986 were the highest as a percentage of the gross domestic product since World War II.
Gramm-Rudman-Hollings was added to the debt ceiling bill in the Senate for three reasons. First, it was the idea of the three Senators for which the process was named ó Republicans Phil Gramm (Texas) and Warren Rudman (N.H.) and Democrat Fritz Hollings (S.C.). Second, the Senate doesnít have the same germaneness restrictions as the House, so offering an amendment that was considered outside the scope of the bill was more acceptable.
The third reason was that the debt ceiling in 1985 was considered to be ďmust-passĒ legislation. It was one of the few bills most Representatives and Senators from both political parties thought absolutely had to be enacted when it was needed or the government would turn into a fiscal pumpkin at midnight when the existing ceiling expired. As a result, there were frequently attempts to add unrelated amendments to debt ceiling bills on the assumption that the perceived need for the legislation at some point would overwhelm opposition to individual provisions.
In 1985, increasing the debt ceiling was considered to be a largely technical means-of-financing question, while deficit reduction was always a highly charged policy. As hard as it is to imagine today ó and even though government borrowing is obviously related to whether there is an annual deficit ó the two issues were treated separately back then, and the borrowing limit was almost an afterthought.
The must-pass notion began to change a decade later when the debt ceiling became a big part of the tug-of-war over tax cuts between the Clinton administration and Congressional Republicans and after Treasury Secretary Bob Rubin funded the government for a short time with cash-management techniques that few others knew existed. Rubinís actions frustrated Republicans who suddenly found that what they had always been told about the must-pass nature of the debt ceiling wasnít exactly (or at least immediately) true and didnít provide them with the leverage they had been assuming would force the White House to do what they wanted.
The popular linking of the debt ceiling with deficit reduction is something thatís really occurred only since the 2010 elections. Thatís when the tea party wing of the Republican Party made not voting to raise the governmentís borrowing limit one of its most basic tenets. For the tea partyers, itís as much a test for Republican lawmakers as the pledge not to raise taxes.
Terri Henderson, 6, center, whose mother is El Salvador, attends a rally with members of Congress at Union Station's Columbus Circle to announce the Restore Opportunity, Strengthen, and Improve the Economy (ROSIE) Act on July 29, 2014. The legislation provides incentives for government contractors to pay a living wage and other benefits that would help low-income workers.