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September 5, 2013
Republicans Once Hated Debt Even More Than Taxes
Joseph J. Thorndike

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The Republican Party has changed a lot over the last half-century, and nowhere is the transformation more obvious than during debt ceiling debates. Today's GOP leadership has served notice that any increase in federal borrowing authority must be packaged with major spending cuts. In a similar debate 46 years ago, Republicans made the same demand -- but asked for a tax increase, too.

The debt ceiling battle of 1953 was the nation's first real crisis over statutory borrowing limits.1 But it was not the last. Indeed, after President Eisenhower's confrontation with Senate Finance Committee Chair Harry F. Byrd, such arguments became a fixture of postwar politics.

Some of these debates have been fairly muted, confined to the relative obscurity of congressional committee rooms. Such was the case in 1953, when Byrd simply tabled Eisenhower's request to raise the debt ceiling. But other debt debates have been more public. In June 1967, for instance, lawmakers actually voted down a debt ceiling increase on the floor of the House. It was the first time in American history that either chamber had explicitly rejected an increase.

The 1967 story actually began early in the year, when Treasury warned Congress that federal employees might soon confront "painful payless paydays" unless lawmakers immediately raised the existing, "temporary" debt limit -- then pegged at $330 billion.2 (The ceiling was temporary because Congress hadn't approved a permanent increase in borrowing authority since 1959.)

Conservatives reacted poorly, demanding that President Johnson first submit a detailed and accurate budget. "How could we act to give the administration new borrowing authority before we know what it is spending?" asked Rep. John W. Byrnes, ranking Republican on the House Ways and Means Committee. "This administration has done too much to hide the facts on its spending this last year. It has employed gimmicks. It has understated its defense costs, and has sent us phony budget estimates."3

Such complaints did not impress Democrats, and since the party controlled both houses of Congress, Johnson got his ceiling increase. But the $6 billion increase voted on in March didn't last long. Two months later, Treasury was back asking for more.

And this time, the increase was supposed to be both permanent and big. In late May, House Ways and Means Chair Wilbur D. Mills asked his panel to approve the Treasury request for a borrowing limit of $365 billion -- a giant step up from the existing permanent cap of $285 billion, and a sizable increase even from the temporary limit of $336 billion approved in March.

Ways and Means approved the new limit on a party-line vote. Democrats insisted that the borrowing increase was necessary, and they justified its size by pointing to a variety of possible budget contingencies, including higher costs for the war in Vietnam and lower-than-expected tax revenue. The increase should be large enough to get the country through the end of the next fiscal year, Democrats said.4

Republicans on the committee were unconvinced -- by the administration's budget projections, its need for a borrowing increase, and almost everything else that Democrats had to say. In their minority report, GOP members called for a return to fiscal responsibility. Current budget problems were the direct result of Democratic overspending on "guns, butter and jam," with the last category presumably describing the most discretionary sort of federal outlays.5

"A Democrat administration and a Democrat-controlled Congress have proceeded on the assumption that there is no deficiency in our society which the Federal purse and the heavy hand of Federal regulation could not cure," the GOP report declared. "We have seen each piece of legislation beget more legislation, each new expenditure by the Federal Government beget other expenditures."6

Republican Alternatives

The Republicans insisted that any debt ceiling increase be preceded by a wholesale revaluation of the federal budget. "Facing a deficit of this magnitude, the administration and the Congress should 'stop, review, and revise' our whole fiscal policy," they wrote. "This is the time for 'austerity' at home."7

But what might austerity look like? Clearly, it would involve spending cuts, if the Republicans were going to have their way. But it might also involve new taxes. The expected deficit "requires a new appraisal of revenue requirements," the minority acknowledged. "While no one likes to increase taxes, yet an increase must be considered as a step toward reducing both the deficit and the need for an additional $29 billion in borrowing authority."8

In other words, taxes were bad, but debt was worse. The Republicans of 1967 certainly preferred spending cuts to revenue increases. But they were willing to grant that both might be necessary, given the size of projected deficits. Journalists noted that GOP support for tax increases was not exactly enthusiastic; the minority report's wording was carefully calibrated to open the door to new revenue while still stressing the spending side of the fiscal equation.

But everyone recognized that the door was, indeed, open. And that was no small thing, since Republicans had been notably cool to Johnson's suggestion, made in early 1967, that some sort of income tax surcharge might be necessary soon.

Republicans acknowledged that they were unlikely to get the budget reappraisal they were seeking. But that simply underscored the importance of voting down the debt ceiling increase. "The failure of the administration to meet its obligations to the American people leaves us no course except to oppose this bill," they wrote. "It is the only recourse left to us. Only by this means can we bring about a reappraisal of expenditures and revenue needs in the light of a threatened budgetary deficit which is intolerable."9

"The Administration asks Congress to give it a 'blank check' to run up a deficit of $29 billion," the GOP members concluded. "This we refuse to do."10

Floor Defeat

Having secured his party-line approval for the ceiling increase, Mills brought it to the House floor on June 7. He did not expect trouble, beyond some predictable GOP posturing. (Which he got: "This is a time for austerity," complained Rep. H.R. Gross in a typical comment. "We are eating steak on a hamburger income."11)

But Mills was in for a surprise. A united Republican caucus convinced 34 Democrats -- including numerous Southern fiscal conservatives and a few Northern antiwar liberals -- to join them in voting down the debt limit increase. The bill failed by a vote of 210 to 197.

The defeat was a "humiliating blow" for Johnson, according to The Wall Street Journal, especially since it marked the first outright rejection of a debt limit increase by either house since the ceiling was first established in 1917.12 It was also a major embarrassment for Mills, who hadn't suffered a floor defeat on a committee bill in nearly a decade.13

Mills seemed a little stunned. Asked by a colleague what he planned to do, Mills responded with a simple "I don't know." When told he had to do something, he grew impatient. "You only have to die and to pay taxes," he snapped.14

The defeat was not a short-term problem, since federal debt would stay under the existing limit through the end of June (when official projections indicated that it would total $324.3 billion). But the $330 billion limit was temporary and slated to expire on June 30, at which point the cap would revert to the permanent figure set in 1959 of $285 billion. And that would be a problem.

Aftermath

"Exultant" Republicans followed up their victory by offering to extend the temporary $336 billion ceiling through September 30. Party leaders considered the offer generous, given Johnson's defeat. Indeed, they hoped to leverage their victory to force the sort of spending cuts laid out (in extremely general terms) by the Ways and Means minority report.15

House Minority Leader Gerald Ford told reporters that domestic spending could be cut by $4 billion in the next fiscal year, although he declined to identify specific cuts. Meanwhile, Byrnes toned down his already muted enthusiasm for any sort of tax increase. Yes, Republicans might still support a tax increase, but spending cuts were the first priority, he said.16

Editorial pages in most newspapers were critical of the House vote. "Normally the Republicans have been content to make a show of protest about the ceiling before acquiescing in its rise," noted The New York Times. The new debt dissidents, however, had "transformed the old byplay into a potentially serious battle that could severely handicap the Treasury's efforts to manage the debt in an intelligent and constructive manner."17

Moreover, showboating over the debt ceiling allowed critics to avoid taking responsibility for hard budgetary choices, the Times complained. "Neither Republicans nor the Democrats who voted against raising the debt ceiling have shown themselves eager to cut nonessential appropriations and to support proposals for increasing revenues."18

The Washington Post agreed. "Voting against the lifting of the debt ceiling is a time-honored -- and politically painless -- means of protesting against the rapid growth of federal expenditures," the editors wrote. "But it is also disingenuous inasmuch as those who vote against higher debt often lack the courage to vote against the appropriations that make higher debt ceilings necessary."19

More conservative papers, on the other hand, were pleased by the vote. "The purpose of a limit is to limit," intoned the Chicago Tribune. "If the debt limit has become meaningless, as some charge, it is only because Congress has made it so by meekly raising the limit every time it began to get in the way of government spending."20

Eventually, lawmakers in both parties understood that the debt limit had to rise. The eventual compromise, hammered out by Democratic leaders, allowed for almost the same amount of total borrowing as the original measure that had gone down to defeat. But it kept some of the extended authority classified as temporary, which pleased enough fiscal conservatives to put together a workable majority. Fifteen of the Democratic defectors on June 7 returned to the party fold, and the new bill passed the House on June 21 by a vote of 217 to 196.

Republicans, however, remained steadfast in opposing the higher debt limit, complaining that it was only the barest of improvements on the initial bill. And any talk of GOP support for tax increases disappeared, too, as Democrats found a way to move forward without engaging GOP calls for sweeping fiscal reform.

Still, the 1967 debt ceiling crisis was notable for the relative moderation of GOP fiscal conservatives. Then, as now, most Republicans were deeply unhappy with the trajectory of federal spending. And then, as now, they hated most tax increases. But Republicans were even more worried about the steady rise of federal borrowing in the postwar decades.

Worried enough to consider a tax increase, at least for a while.


FOOTNOTES

1 Joseph J. Thorndike, "Can Debt Ceiling Debates Be Useful?" Tax Notes, Aug. 26, 2013, p. 862 2013 TNT 165-4: News Stories.

2 Philip Warden, Chicago Tribune, Jan. 13, 1967.

3 Id.

4 House Ways and Means Committee, "Public Debt Limit," 90th Congress, 1st Sess., Report No. 331, June 2, 1967, at 1-2.

5 Id. at 18.

6 Id. at 17.

7 Id. at 21-22.

8 Id. at 22.

9 Id. at 23.

10 Id.

11 Richard L. Lyons, "Protest Vote in House Kills Debt Ceiling Bill," The Washington Post, June 8, 1967, at A1.

12 "House Rejects Debt-Limit Boost to $365 Billion Sought by Johnson," The Wall Street Journal, June 8, 1967, at 2.

13 Supra note 4.

14 Warden, "House Kills Bill to Hike Debt Ceiling," Chicago Tribune, June 8, 1967, at 3.

15 "House GOP Bids to Keep Current Debt Lid Until Sept. 30; Chance of Big Rise Seen Slim," The Wall Street Journal, June 9, 1967, at 2.

16 Id.

17 "The Ceiling Battle," The New York Times, June 11, 1967, at 206.

18 Id.

19 "Debt Limit Defeat," The Washington Post, June 9, 1967, at A22.

20 "A Red Light in Congress," Chicago Tribune, June 12, 1967, at 24.


END OF FOOTNOTES