Sunday, July 31, 2011

Make sure you have the legal authority to pay the bills due now; then do another extension

Last night, on the dance floor at a local gay club in Washington DC three miles from the Capitol, a lot of cell phones were being watched, I mean A LOT.  Cab drivers were charging more because of unusual demand.

As of Sunday morning, the talks continue, and generally the media sounds more hopeful of a deal, but the optimism isn’t certain or consistent. The next critical vote is at 1 PM, about the time a baseball game starts. (The Nationals broke their losing streak last night after a trade with Maya tossing a surprise shutout; maybe that helps change the mood. And after all, the NFL got a deal, too.)

From the dance floor, I heard speak of an idea that sounds amazingly simple, in case the current talks “fail” Sunday morning.

Pass a minimal debt ceiling extension immediately that covers only the bills actually due. Include the bond interest, social security, veterans’ benefits, military pay, contractor and federal employee pay for time already worked, as well as Medicare and Medicaid payments for medical treatment already rendered to eligible patients. But do not continue any spending that creates more bills. That means massive federal government shutdown and furloughs of federal workers and contractors.  That could mean that the FAA and TSA shut down and airports close, for example, and new Medicare claims are not paid. Then have a second negotiation to extend the debt to allow the federal government to operate and incur new liabilities in proportion to what was appropriated for the rest of this fiscal year. Obviously, the appropriations for the FY2012 must match the legal ability to borrow. It will become apparent very quickly that a second, operations-based extension is necessary.

What seems wrong and illogical is the idea that you continue to operate the federal government at all if it cannot pay existing bills.  So, I agree with the idea, really, the president is authorized to pay existing obligations (but not create new ones) by existing constitutional authority, including the 14th Amendment  (and I believe he has authority now to borrow for existing Social Security.  Pay your bills to date, then stop incurring any new ones or creating any new liabilities until you have the legal authority to borrow to spend the money you have already appropriated.

Since we have an appropriation process, all of this makes me wonder, again, why we have a debt ceilig at all. The concept seems legally redundant.

Is the Tea Party really trying to "blow up" (Antonioni style) the economy?  Let’s point out one other show-stopper: if you don’t get your debt growth under control, we may soon reach a situation where we can’t roll over our treasury bond principal, even with a debt ceiling extended.  That point gets overlooked (it was pointed out by the Washington Times Friday).  So there is some reason to think the house could burn anyway.

There doesn’t seem to be any choice. We must have authority to borrow to pay our existing bills, and separate authority to spend money already appropriated to run the government. But we must cut spending in all areas, including both defense and entitlements (and, to an extent, means test), and have the moral debate that must follow it.  And we must roll back tax loopholes and gratuitous tax cuts.  

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