Economy & Budget

Debt ceiling or default?

Debt ceiling or default?

According to his 2013 budget, President Barack Obama anticipates about $2.9 trillion in revenues this fiscal year, but wants to spend $3.8 trillion. To make up the shortfall, he needs to borrow another $900 billion, on top of our existing $16 trillion debt. To help him out, congressional Democrats want to repeal the debt ceiling, in force since 1917. According to the president, even asking whether it’s prudent to hike that ceiling raises “the threat of default.”

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Being unable to borrow another $900 billion this year wouldn’t force Obama to default on the debt. Indeed, the president is constitutionally prohibited by the 14th Amendment from doing so: “The validity of the public debt of the United States, authorized by law … shall not be questioned.” Payment of interest on the debt is thus guaranteed, unlike other federal spending – including Social Security, which is explicitly not so protected.

Fortunately, we don’t have to choose between servicing the debt or paying for Social Security. Interest on the debt is projected to cost $247 billion this year, just 8.5 percent of the federal government’s anticipated $2.9 trillion in revenues. That leaves about $2.7 trillion for everything else. According to OMB, that’s enough to pay for Social Security, Medicare, national defense, veterans’ affairs, administration of justice, international affairs and general government, with about $280 billion left over. And that’s without cutting a penny from any of these programs.

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Of course, each of these is rife with waste that could be cut. A 2011 GAO report identified $135 billion spent on duplicative and overlapping programs in the Department of Defense; $125 billion in “improper payments,” mostly Social Security, Medicare and Medicaid fraud; $58 billion in waste in the Department of Transportation, and so on down the line. Congress now has another chance to address this issue, which it punted in the August 2011 debt-ceiling deal.

That deal was widely criticized for “kicking the can down the road” just 18 months: We’ll hit the ceiling again as early as February. But this time around, the GOP leadership has proposed a bill that makes the 2011 deal look like a model of farsighted statesmanship: It’s yet another short-term compromise – this one just enough to cover the budget shortfall for another three months.

If either the House or the Senate fails to pass a budget by April 15, the proposal mandates that the government withhold paychecks for all members of that body until they pass a budget. Because congressional Democrats tend to be richer than their Republican counterparts (8 of the 10 wealthiest members of Congress are Democrats), this proposal will put more pressure on the GOP to cave – just as the 2011 deal put pressure on Republicans to raise taxes by slashing defense spending, while letting Democrats off the hook by allowing non-defense spending to continue to rise.

Sen. Chuck Schumer (D-N.Y.), the Senate’s third-ranking Democrat, said the Senate will actually pass a budget this year, finally bringing the Senate back into compliance with the law (“On or before April 15 of each year, the Congress shall complete action on a concurrent resolution on the budget….”). April will mark four years since that Democrat-controlled body passed a budget – unlike the Republican-controlled House of Representatives, which has passed a budget every year.

The GOP’s “No Budget, No Pay” provision sounds good, but is purely symbolic. It would violate the 27th Amendment (“No law, varying the compensation for the services of the Senators and Representatives, shall take effect, until an election of Representatives shall have intervened”), according to Rep. Darrell Issa (R-Calif.), chairman of the House Oversight and Government Reform Committee.

Apparently, the fact that it takes a threat to their paychecks to bring some politicians to consider fulfilling their oath of office to perform their constitutional duties does not raise any constitutional issue.

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