Monday, January 17, 2011

They Would Not Listen, They Did Not Know How.

Precious leader, it has been barely two weeks since this maven attempted to reeducate our Republican brothers about the true nature of the statutory ceiling on the federal debt. Republicans Never Learn: The Debt Ceiling Now I find that even such an illustrious news institution as the Associated Press (AP) is clueless about the debt ceiling. In an article published in today’s Washington Post (which I think I also saw in our beloved Richmond Times Dispatch), “U.S. debt tops $14 trillion, nears ceiling,” I saw the following statement:
“That means that Congress soon will have to lift the legal debt ceiling to give the maxed-out government an even higher credit limit or dramatically cut spending to stay under the current cap.”(emphasis mine.)
Okay, let’s go through this one more time but slowly:

1- The federal debt is the cumulative total of the amount that federal disbursements have exceeded federal revenue.

2- The statutory debt ceiling is the maximum amount that the Secretary of the Treasury can borrow to cover obligations of the United States.

3- The Congress authorizes federal spending by providing obligational authority to the Executive Branch either in annual or permanent appropriations. (“No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law” U.S. Constitution: Article I, Section 9, clause 7)

4- Once the Congress has provided obligational authority to the Executive Branch it has little or no control over when money will be disbursed from the Treasury to pay off the obligations that have been incurred under that authority.

(Examples: Authority to incur obligations for operating expenses of federal agencies will normally result in constant level expenditures over the twelve months of the federal fiscal year.
Authority to incur obligations by entering into contracts may result in expenditures in the current fiscal year or in future fiscal years, depending on when the contractor performs.
Authority under direct spending [entitlement] legislation results in automatic expenditures when the conditions of the entitlement are met.)

5- In managing the disbursement of funds from the Treasury, the Secretary of the Treasury not only has to deal with the obligations resulting from government operations but also with the maturation of government securities issued in the past. Since government securities are issued in bulk, not individually, maturation results in the need for huge amounts of borrowing authority even if most of these securities are merely rolled over.

As a result of these factors, it is a very simple fact that the second of the options mentioned in the AP article, which I underlined above, is not available. All of the obligations that will result in the Secretary reaching his statutory borrowing authority this Spring are now beyond the control of the Congress. The Congress may drastically cut spending to occur in fiscal year 2012 and thereafter in the budget cycle that will begin with the submission of the president’s budget in February. The Congress may also cut spending resulting from fiscal year 2011 and earlier obligational authority by rescinding appropriations, but only to the extent that obligations have not yet been incurred under that authority. But the Congress cannot rescind appropriations that have already been obligated. Even if it tried to do so, the result would be the government defaulting on its contractual or statutory obligations.

Just so no Representative or Senator can later claim that s/he did not know the ramifications of their vote on legislation to raise the statutory debt ceiling, let me rewrite the AP story:
“That means that the Congress soon will have to lift the legal debt ceiling to allow the maxed-out government an even higher credit limit or ALLOW THE UNITED STATES TO DEFAULT ON ITS OBLIGATIONS, WHICH WILL RESULT IN A WORLD-WIDE ECONOMIC COLLAPSE.”

Perhaps they’ll listen now.

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