Thursday, January 3, 2013

On the absurdity of the debt ceiling

Around the table last week, we opined that the Republicans should allow the U.S. to go over the fiscal cliff (thereby broadening the tax base) and by supporting any spending bill the President offered, subject only to the debt ceiling.  The thinking was that it would force President Obama to offer real cuts in spending, and hang round his neck the consequences of making spending choices.  Alas, I do not think that the Republicans have a trump card in the debt ceiling, and their efforts to negotiate as if they have it will be painful to watch and fruitless in gaining any significant and necessary spending cuts.

I have come to the conclusion that the debt ceiling is a sham in the way it is implemented.  It is being used to say that spending in excess of the debt limit is unlawful, even if Congress appropriated funds exceeding revenues such that the addition of the deficit to existing debt exceeds the debt limit.  As such, the President is put into the dilemma of choosing to spend appropriated funds (mentioned in the Constitution) in excess of the debt limit (not mentioned in the Constitution, but deriving from a Constitutional power).  In my world, and I suspect in President Obama's, the explicit Constitutional provision trumps derived laws.

The power to issue debt was initially given solely to Congress.  In 1917 and subsequent years, Congress delegated that authority to the Treasury but established a debt ceiling in order to control total borrowing.  Beginning in 1979, the House of Representatives began automatically raising the ceiling by the amount of deficit in each year's budget law. (The Senate has no such rule and must raise the ceiling separately.) [1]

I assert that appropriations funded by deficits implicitly raises the actual debt ceiling.  To artificially cap the limit in law begs for legal conflict.

Most entitlements and a majority of Federal spending are permanently and automatically appropriated.  In 2008, approximately 53% of all Federal spending was automatically appropriated. [2]  With this foundation of automatic appropriations, Congress can appropriate no discretionary spending and still cross the debt ceiling.  Is the President responsible if this happens?  Why then is the President responsible if the government spends discretionary appropriations in excess of the debt limit?  The Constitution does not recognize a difference in appropriations.

I can conclude only that the Congress bears sole responsibility for breach of the debt limit, because they alone can appropriate beyond the debt limit .  But since Congress appropriated the funds according to the Constitution, and since the Constitution is the supreme law of the land, then the debt limit law is inferior and does not control either Congress or the Treasury in spending appropriated funds.

I suspect that President Obama's administration has come to the same conclusion and is now deciding whether and how to apply it when the debt limit is reached.  He said on January 1st of this new year, "I will not have another debate with this Congress over whether or not they should pay the bills that they've already racked up." [3]  For myself, I will agree that he is not responsible for exceeding the debt limit, and that the Treasury should continue to pay the bills the government has obligated itself to pay.  For the rest of the country, there will be a civil war of words and cry of impeachment.

My advice to my countrymen:  Blame Congress.  Tell them to stop automatic appropriations and to hold themselves subject to the debt limit when appropriating funds.  It is stupid to tell the President to Spend but not to Borrow when Spending exceeds Revenue, both of which are under Congress' control.

My second advice to my countrymen: Blame ourselves.  We put the people in office who set up these arrangements, and we haven't removed even the worst offenders.  Part of the reason is in the distributed design of our electoral system (which has very strong merits in other contexts), but most of it is in our failure to only elect honest and effective men and women to office who will adhere to the Constitutional limitations established at our country's founding.  Until we change ourselves for the better, we should expect nothing better from our Congress.


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