Here’s How Treasury Secretary Jack Lew Lit a Fire Under Congress
The partial shutdown of the United States government may have ended, but the blame game is still in full swing. Pundits, politicians, and the public, temporarily freed from the burden of impending catastrophe (perceived or otherwise), can focus on not losing the eternal game of “pin the fault on the other party.”
Congress, as the political body primarily responsible for the entire snafu, has emerged from the battle bloodied. America’s legislators have earned themselves a near-record low approval rating of 11 percent during their most recent fit of fiscal brinksmanship, according to Gallup. This year to date, Congress has averaged an approval rating of just 15 percent, less than half the overall historical average approval rating of 33 percent.
What’s more, according to an NBC News/Wall Street Journal poll, a full 60 percent of Americans would vote every single member of Congress out of office right this moment, if they were given the opportunity. A clean slate, the public argues, has got to be better than the Charlie Foxtrot in Washington right now.
But while it is absolutely amusing to break out the political rib spreaders (rough analogy: public sentiment surveys) and try to peer into the heart of the matter, the opportunity to perform invasive surgery on Uncle Sam only comes once every few years, and 2013 is not one of those years. Americans will have to wait until the 2014 election season and use the power of their vote to affect the change they want to see, because it has become exceedingly obvious that most policymakers are unswayed by mere rhetoric.
So instead of assigning blame, we can try to do something more constructive, like give credit to those who helped whip Congress toward a solution, however awkward and temporary it may be. Congress, certainly, doesn’t deserve any credit, and how you feel about President Barack Obama largely falls along party lines, so we won’t touch it. But someone who may deserve a pat on the back is Treasury Secretary Jack Lew.
Brinkmanship is the name of the game in Washington, and there are really only two conditions necessary to play: a big, dangerous policy debate, and a ticking clock. Congress was able to provide its own big, dangerous policy debate (the partial government shutdown and, more significantly, the debt limit) but needed someone else to set the clock.
The House of Representatives may have the power of the purse, but it’s the Treasury that keeps the books and signs the checks. This means that it is the Treasury, not the House, that knows the fiscal situation of the country better, despite being the one with less authority over the money itself. Left it its own devices, it’s unclear that Congress would be able to identify with any authority a “hard deadline” for action on the debt limit.
Enter Secretary Lew, a few letters to Congress, and his testimony before the Senate Financial Services Committee, in which he pounded home and publicized the idea of an October 17 deadline, and started the clock ticking on the screen of every cable news station across the country.
“Washington needs deadlines to get anything done,” Douglas Holtz-Eakin, a former director of the Congressional Budget Office, told Bloomberg. “You need a forcing mechanism and this is as good a one as any.”
Since of the fog of war that surrounds the federal fiscal house, Secretary Lew had to exercise a degree of discretion in picking this date. He made clear that come October 17, the Treasury would exhaust extraordinary financing measures that allowed it to borrow from other government agencies (the actual debt limit had been hit back in May.) After this point, Treasury would have about $30 billion in hand and would have to rely on income revenues to pay the bills.
But because of the uncertain and volatile nature of revenues and expenditures, it is difficult (neigh impossible) to predict with any certainty what inflows and outflows will be, exactly, on any given day. Could the government pay all its debts without issue through the end of October? Possibly. But there was just no way to know.
Instead of risk getting to that point and finding out the hard way, Secretary Lew decided to light a fire under Congress by telling them exactly how far they could push the envelope, and getting the entire weight of the public behind the deadline.