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FDR Didn’t Insist on a “Clean” Debt Limit Bill

- April 18, 2011

This is a guest post from “Eric Schickler”:http://igs.berkeley.edu/schickler/:

bq. I have been reading a lot of the commentary complaining that Obama is demonstrating unprecedented weakness in failing to demand a clean debt limit bill and instead risks allowing Republicans to use the must-pass bill to impose their priorities. Would Franklin Roosevelt — or any other strong president — have ever allowed such a thing to happen? Of course not.

bq. Except that Roosevelt did. During World War II, Roosevelt issued an executive order limiting after-tax salaries to $25,000. Not government-worker salaries. Private salaries. This was done mainly to keep a lid on wages and prices, but was also part of a more general tax structure in which top marginal rates were in the 90+% range. Congressional Republicans wanted to repeal the order, as did conservative Democrats. Their vehicle: a bill to increase the debt limit.

bq. Republicans and Southern Democrats added the rider to repeal the cap in the Ways and Means Committee. It then passed on the floor — over the vehement opposition of Democratic leaders — and was enacted into law. Roosevelt signed the bill, presumably deciding that default in the middle of World War II was not an acceptable option.

bq. Now there are some important differences between 1943 and 2011. First, it was the minority party in the House — in combination with a dissident faction in the majority — that forced the President’s hand (rather than the majority party in the House attempting to do so). Second, and perhaps more important, there was a clear floor majority in both the House and Senate that opposed FDR’s order. Today, it is not so clear that a majority in the Senate agrees with the Republican position. As a result, Boehner and the Republicans likely have a weaker hand than did the conservative coalition in the 1940s.

bq. But it is wrong to say that a President can credibly threaten to veto any debt limit increase that is not “clean.” If FDR was unable to pull that off in the middle of World War II — with approval ratings likely in the 60s — it is hard to believe Obama could do so today.