Wednesday, July 27, 2011

The Abysmal Republican Congress

A new poll reported in the July 26 Washington Post, More Americans unhappy with Obama on economy, jobs, indicates that more than a third of those polled believe that President Obama’s policies are hurting the economy and that confidence in his ability to create jobs is eroding among his base. The poll also found that as many people blame Republican policies for the poor economy as they blame the president. But, on the issue of jobs, the poll shows that more people disapprove of the Republican performance (65 percent) than they do of the president’s performance (52 percent). Which sort of makes me wonder why the Post headline centers on President Obama.

Despite the perception by political pundits that conservative philosophy is now dominant in our country and that liberals are a dying breed, the results of the Post poll indicate clearly that the American people expect the government to fix our ailing economy. I see no indication in the poll that anybody blames businesses—whether large or small—for the state of our economy. Likewise, nobody faults business for failing to create more jobs.

I assume from the article that the designers of this poll phrased their questions in terms of policies (e.g. Do you believe that the policies of X are helping or hurting the economy). Yet policies can have no real effect on the economy. It is only actions that can make a difference. And, dear reader, under our Constitution it is the Congress, rather than the President, that must take action. Only the Congress can enact legislation. The President gets to vote on legislation only if and when the Congress passes it.

Congressional Republicans won a significant victory in the 2010 national elections. The Republicans, with John Boehner and Eric Cantor as their leaders, now control the House of Representatives. Further, the Republicans, with Mitch McConnell and John Kyl as their leaders, now have sufficient votes in the Senate to maintain a filibuster and thus block legislation they oppose. You would think that with as many votes as the Republicans have they would have been able to enact some significant legislation in this the first session of the 112th Congress. If that’s what you think, reader, you are thinking wrong.

In the nearly seven months that the 112th Congress has been in session it has enacted only 23 public laws. This compares with 283 public laws enacted in the 110th Congress and 205 public laws enacted in the 111th Congress during the first seven months of those congresses.

Among the 112th Congress’s laws you have such significant legislation as 1- a law naming the federal courthouse in Yuma, Arizona, after John M. Roll; 2- a law naming the federal building and courthouse in Martinsburg, West Virginia, after W. Craig Broadwater; 3- a law providing for the appointment of Stephen M. Case to the Board of Regents of the Smithsonian Institution; 4- a law naming the United States Postal Service building in Inverness, California, after Specialist Jake Robert Velloza; 5- a law providing for the reappointment of Shirley Anne Jackson to the Board of Regents of the Smithsonian Institution; 6- a law providing for the reappointment of Robert P. Kogod to the Board of Regents of the Smithsonian Institution; 7- a law naming the United States Postal Service building in Rootstown, Ohio, after Marine Sgt. Jeremy E. Murray; and 8- a law naming the United States Postal Service building in Cary, Mississippi, after Spencer Byrd Powers, Jr.

After subtracting these eight pieces of landmark legislation, that leaves 15 public laws of substance that the 112th Congress has enacted. Or, has it? Three of those laws were temporary extensions of the continuing resolution providing funding for the federal government. Two laws extended two programs of the Small Business Administration first from January 31, 2011, to May 31, 2011,and then to July 31, 2011. Another law extended two programs under the Patriot Act from February 28, 2011, to May 27, 2011. Three public laws extended the taxes and authorization of the Airport and Airways Trust Fund first by two months, then by an additional month and finally by an additional 22 days. One law extended the entire Patriot Act by five years. Another law extended the operation of the Ronald Reagan Centennial Commission by seven months. And, one law extended programs under the Surface Transportation Act through September 30, 2011. So, twelve of those public laws did nothing but extend the expiration dates of certain programs.

This leaves us with three significant public laws enacted by the 112th Congress between the beginning of January and the 26th day of July. These three laws are: Public Law 112-9, which makes three minor changes to the Internal Revenue Code; Public Law 112-10, which provides funding for the federal government through the end of fiscal year 2011; and Public Law 112-18, which authorizes appropriations for the intelligence activities of the Government.

That’s all folks.

The Republican dominated Congress has passed no laws addressing our troubled economy. The Republican dominated Congress has passed no laws creating jobs.

What has the 112th Congress done? The Republican controlled House of Representatives, led by John Boehner and Eric Cantor, voted to repeal the Affordable Health Care Act, voted for a budget that would eliminate Medicare and has held the country hostage for months by refusing to pass legislation enabling the Secretary of the Treasury to pay the government’s lawful obligations after next Tuesday.

What a wonderful Congress!

Monday, July 25, 2011

Deadbeat Republican Values

Don’t they know that the children are watching and listening? Don’t they appreciate what they are teaching them? It is bad enough that for years the Republican Party leadership has been preaching and acting out the values of greed and selfishness. These Republican values have produced an entire “me first” generation; people who seek to maximize their own collection of toys and refuse to share with others. Now, the Republican leadership (Boehner, Cantor, Bachman, McConnell, Kyl) are teaching a new Republican value—don’t pay your bills.

With the exception of three fiscal years under the Clinton Administration, ours has been a debtor nation since at least 1981. Republicans and Democrats undoubtedly can argue over who is to blame for our huge national debt, but placing blame serves no legitimate purpose. The fact is that we have spent about $13 trillion more than we have received in revenues. Even this fiscal year, after an election in which Republican candidates pledged fiscal responsibility, the Congress voted to increase our national debt by extending the Bush Administration tax cuts (decreasing potential revenue) and providing funding to operate the Federal Government for the remainder of fiscal year 2011 (increasing spending). Both Republicans and Democrats voted to create this additional amount of debt.

When the Congress enacts appropriations it provides to federal agencies the authority to enter into obligations legally binding on the United States. The obligations agencies incur may be paid off quickly (e.g. compensation for employees) or over years (e.g. payments under defense contracts). In either event, so long as the Government operates with annual deficits, the Secretary of the Treasury pays off these obligations with two sources of money—revenues to the Government while they last, and borrowing after the revenues are exhausted.

The Congress has granted to the Secretary of the Treasury the authority to borrow funds on behalf of the United States in sections 3101 through 3113 of Title 31, United States Code, in a subchapter that is appropriately titled “Borrowing Authority.” In this subchapter, the various debt instruments—bonds, notes, certificates and others—that the Secretary may issue to borrow funds are authorized and described.

Dating from a time when running at a deficit was occasional, not the rule, the subchapter contains a limit on the amount of securities the Secretary can issue. This limit—designated “Public Debt Limit”—is contained in section 3101(b) which provides, “The face amount of obligations issued under this chapter and the face amount of obligations whose principal and interest are guaranteed by the United States Government . . . may not be more than $12,394,000,000,000 outstanding at one time.”

Reader, it is important to remember that this “public debt limit” is not a limit on the amount that the United States owes. Rather it is a limit on the amount of securities that the Secretary can issue to raise cash. It is also important to remember that raising this borrowing limit does not increase the amount of the Government’s debt. Further, failing to raise it does not freeze the amount of debt.

The Secretary of the Treasury has already reached his borrowing limit. He has told the world that as of August 2, 2011, he will not have sufficient cash to pay the Government’s obligations. Now, you would think that the Republican leadership—those guys and gals who claim to be fiscally responsible—would give the Secretary the authority he needs to pay our bills. But, for months, the Republican position has been “no.” They have made it clear that they will allow our bills to be paid only if the President bows to their demands. One of them, Representative Bachman, has made it clear that she will not vote to pay our bills even if the President concedes to all Republican demands.

Loyal reader, the Republicans will tell you that they are being responsible and are trying to cut our debt. But these Republicans are the same people who voted to increase our national debt in this very fiscal year. And, now, when the bills that they authorized so recently come due they say they aint gonna pay. So remember, when the Secretary of the Treasury does not have enough cash to pay our fighting forces, or our hard-working federal employees, or the contractors that in good faith provided us goods and services, it’s because of Republican values.

Wednesday, July 13, 2011

End The Insanity—Repeal The Public Debt Limit

Loyal reader, you know that over the years of my mavenhood I have written repeatedly about the dangers of our national addiction to deficit spending. Also, I have explained that the actual debt of the United States Government is created by the tax and appropriation legislation that the Congress enacts and the President signs. Further, the “public debt limit” contained in section 3101(b) of title 31 of the United States Code is a limit on the amount of securities that the Secretary of the Treasury can issue in borrowing funds to pay the obligations of the government. It is not a limit on the actual debt.

Unless you have been in a Rip Van Winkle nap for the past six months you know that we are going through a public debt limit crisis. The Republican majority in the House of Representatives is refusing to raise the limit on borrowing unless the President agrees to its demands for severe spending cuts. This has forced the Secretary of the Treasury to do some artful dodging to make sure that the obligations of the United States are paid when they come due. However, the Secretary has indicated that after August 2, 2011, he will run out of other options and will be unable to pay some of the government’s obligations. In other words, the United States will be forced to default on the debt it owes.

This is the third major public debt limit crisis I can remember. The first two occurred during my previous career as an attorney for the Federal Government. During the second of these, in 1995, I spent many weeks monitoring the operations of the Treasury Department to assure that the Secretary did not violate the statutory borrowing limit. Although it was fun, this second crisis convinced me that the whole thing was madness. These debt limit crises are created by the Congress and political leaders in the Congress use them to try to force their opponents to agree to changes they don’t want. Everybody assumes that eventually somebody will blink and the crisis will be resolved. No responsible person really wants to see what would happen if the United States actually defaulted.

I assume that there was a time when the “public debt limit” made sense. For most of its existence the United States Government lived within its means. Revenues resulting from customs and other excise taxes and land sales were adequate to cover the normal costs of government. It was only during exceptional periods like wars that the government needed to rely on borrowing to cover its costs. During those times, the Congress exercised its exclusive constitutional power to borrow on the credit of the United States by granting to the Secretary of the Treasury authority to borrow by issuing securities. It was reasonable to limit the amount of securities to be issued by the Secretary to an amount commensurate with the anticipated deficits.

It is only during the last forty to fifty years that operation of the government on a deficit basis has become the norm rather than an occasional practice. Because of the unwillingness of the Congress and the President to make the politically tough decisions to either reduce spending to meet our revenue or increase revenue to meet our spending there have been very few years during this time when the federal budget was balanced or had a surplus. The result of this out-of-control spending spree is that the amount owed by the United States Government has increased from about 3/10 of a trillion dollars in 1965 to over 13 trillion dollars today. During this entire period, the Congress has had to repeatedly increase the “public debt ceiling” to match the amount of debt it has already authorized by appropriating more funds than were taken in by taxes.

Trusted reader, the “public debt ceiling” makes no sense in a time of perpetual deficit government. The debt of the United States is controlled by the appropriation and tax legislation that the Congress has enacted with the President’s approval. The statutory limit changes nothing. Technically it is merely a formality because the Congress has already authorized an increase in our national debt. The borrowing limit serves no purpose other than allowing hypocrites in the Congress to play the “debt crisis game.”

The Republican leadership in the Congress is portraying itself as being fiscally responsible by resisting the required increase in the statutory “public debt ceiling.” However, these leaders know that the borrowing ceiling has no effect on the actual national debt. They know that they agreed to a national debt far in excess of the current “public debt ceiling” when they voted to extend the Bush Administration tax cuts and to fund the government for the rest of fiscal year 2011 six months ago. If they really cared about the national debt, they could have done something about it back then. Instead, they have tried to hold the government hostage for the past four months by threatening to allow the government to go belly up if they don’t get their way over spending cuts. All but the craziest of them are responsible enough to know that they would never actually allow government default. It is only the statutory “public debt ceiling” that allows them to play this game.

The statutory borrowing authority really serves no purpose. It also gets us into these crazy crises on a too frequent basis. It is time to repeal the “public debt ceiling.” Section 3101(b) of title 31, United States Code, should be amended to provide that the Secretary of the Treasury may issue public debt securities in an amount necessary to pay all the obligations of the government. We need to free ourselves from the insanity of debt crises.

Monday, July 11, 2011

Retirement Benefits For Reva Trammel?

According to Richmond’s great metropolitan daily newspaper, Councilwoman Reva M. Trammel has proposed an ordinance that would restore retirement benefits for members of the Richmond City Council. These benefits were cancelled by the 1996 edition of the City Council. As described in the Times-Dispatch article, Ms. Trammel’s proposal would reinstate benefits for members of the council who have served for ten years and who were in office on July 1, 2011. My research and the TD article indicate that the first member of the City Council who would become eligible for the restored benefits if Ms. Trammel’s ordinance is enacted is—you guessed it—Reva M Trammel.

Reader, I do not object to our elected officials in Richmond being paid a reasonable compensation for their service, including retirement benefits for extended service. Nor are we dealing with a huge amount of money. The TD article indicates that if the retirement benefits are restored the annual cost to the taxpayers would be about $60,000 per year. (Of course, with the suddenly reborn concern about poverty in our city, perhaps it would be better to spend that $60,000 to create two new jobs for unemployed residents of the city, but that’s just my opinion). But, what upsets me is that nobody, including Ms. Trammel, seems at all concerned about appearances.

A bit of history: During the debate on ratification of the Constitution, anti-Federalists expressed concern over Article I, Section 6, clause 1, which gave the members of the Congress the power to set their own compensation by statute. To deal with this concern, the First Congress included the following amendment among the twelve they submitted to the states for ratification as the Bill of Rights: “No law, varying the compensation for the services of the Senators and Representatives, shall take effect, until an election of representatives shall have intervened.” This amendment was intended to make sure that if the Congress voted itself a pay raise the electorate had the opportunity to voice their displeasure by voting those members out at the next election. (The amendment only referred to election of representatives because until the ratification of the Seventeenth Amendment in 1913 Senators were appointed by the state governments rather than elected by the people.) As it happened, only ten of the Bill of Right amendments were ratified by the states and the compensation restriction lay dormant for over 200 years. It was not ratified as our twenty seventh amendment until 1990.

Reader, I am not suggesting that Ms. Trammel made the effective date of service in her proposal July 1, 2011 to assure that she received a pension even if she were defeated for reelection next year. However, she is the only member of the council for whom this is true. No other incumbent member of City Council can attain ten years of service and qualify for the proposed benefits without facing the voters next November. The voters of eight council districts in the city can protest their councilperson giving him or herself a compensation increase by defeating him or her at the next election and making sure that member does not benefit from the increase. This is the right that the Twenty Seventh Amendment gave voters for members of the Congress. It is only the electorate of the Eighth council district that will lack this right.

It is important that the members of the City Council avoid any appearance of impropriety in enacting legislation for the city. The council should amend Ms. Trammel’s proposed ordinance so that it applies only to members of the council serving on and after January 1, 2013.

Friday, July 08, 2011

14th Amendment And The Debt—Nice Try But No Cigar

With the days dwindling down to a precious few until D[isaster]-Day—the day on which the Secretary of the Treasury predicts he will no longer be able to pay the obligations of the United States without the Congress increasing his authority to borrow—people are grasping at straws to find a way to save us from the temper tantrum currently being waged by Republicans in the House of Representatives. One of these straws is the argument that under Section 4 of the Fourteenth Amendment to the United States Constitution the statutory borrowing limit contained in section 3101 of title 31 of the United States Code is unconstitutional and that the President is free to ignore it. “Obama could play constitutional card,” Washington Post, July 7, 2011, print edition, page A4. Unfortunately, this argument is a very short straw.

The Fourteenth Amendment provision being relied on to get us out of our predicament reads, in its entirety:

”The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.”

This post Civil War provision was designed to assure that debts incurred by the United States in fighting the war would be honored but that debts incurred by states or the Confederacy in fighting against the United States or claims for emancipated slaves could not be paid.

The proponents of the Fourteenth Amendment salvation argument rely on just 14 words from Section 4 of the amendment: “The validity of the public debt of the United States . . . shall not be questioned. “ They argue that these 14 words somehow make it unconstitutional for the Congress to impose a statutory limit on the amount of money that the Secretary of the Treasury can borrow. Aside from the fact that they quote these 14 words out of context, the Fourteenth Amendment proponents show a marked ignorance about the financial operation of the Federal Government.

Because they had experienced first-hand the tyranny that could arise from placing too much power in a single person, the drafters of our constitution placed control over financing for the new Federal Government in the Congress. This “power of the purse” is contained in two provisions of the constitution. Article I, Section 8, clause 2 of the constitution grants to the Congress the power “To borrow Money on the credit of the United States.” Article I, Section 9, clause 7 provides “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” Under these two provisions, only the Congress can appropriate and only the Congress can borrow.

The Congress has implemented its borrowing power by enacting what is now Chapter 31 of Title 31 of the United States Code. In this chapter the Congress delegates to the Secretary of the Treasury the authority to borrow on behalf of the United States and specifies the various securities (bonds, notes, certificates) that the Secretary may issue in securing this borrowing. Section 3101(b) of title 31 provides: “The face amount of obligations issued under this chapter and the face amount of obligations whose principal and interest are guaranteed by the United States Government . . . may not be more than $[X], outstanding at one time.” Whatever amount the Congress substitutes for the “X” in this section is the borrowing limit (referred to as the “Public debt limit”). The Secretary of the Treasury may not borrow in excess of that limit and, presumably, any securities he issues in excess of that amount would not be valid obligations of the United States. During recent decades, in which the United States has been operating on a deficit basis, the Congress has had to raise the borrowing limit from time to time to allow the Secretary to borrow sufficient funds to pay off the government obligations that the Congress authorized in appropriations acts.

Reader, it seems clear to me that the statutory limit that the Congress has placed on the authority of the Executive Branch to borrow funds is a direct exercise of its borrowing power under Article I, Section 8, clause 2. What can there be in Section 4 of the Fourteenth Amendment that would make this exercise of the Congress’ exclusive borrowing authority unconstitutional?

Although the Fourteenth Amendment provision was specifically directed at public debt incurred during the Civil War, the Supreme Court of the United States has made it clear that it applies equally to public debt obligations issued after its ratification. Perry v. United States, 294 U.S. 330 (1935). In the Perry case, the Court was dealing with a Fourth Liberty Loan bond for $10,000 issued in 1918 that called for payment “in United States gold coin of the present standard of value.” A Joint Resolution of the Congress passed June 5, 1933, however, provided that bonds could only be paid at their face value “in legal tender currency.” This significantly reduced the amount that was payable under the bond. The Court held that the 1933 joint resolution was unconstitutional because the Congress did not have the authority to change the terms of public debt obligations after they were issued. The Court interpreted the term “validity of the public debt” in the Fourteenth Amendment as “embracing whatever concerns the integrity of the public obligations.” 294 U.S. at 354.

So, precious reader, does 31 U.S.C. section 3101(b) run afoul of the Fourteenth Amendment? No. The statute does not declare any existing debt obligation to be invalid. It does not change the terms of any existing debt obligation. In fact, it does not apply to existing debt obligations at all. It only restricts the authority of the Secretary of the Treasury to issue new debt obligations, an authority which the Secretary only has by delegation from the Congress in the first place. Section 3101(b) does not question the validity of the public debt of the United States because, in the words of the Supreme Court, it does not “concern the integrity of [any] public obligations.”

We need to stop relying on miraculous constitutional theories to get out of our debt crisis. The Congress needs to do its job and raise the statutory borrowing limit so that the Secretary of the Treasury can pay the Federal Government’s debt. Only the Congress can avoid D[isaster]-Day.