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.

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.