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Not Enough Yet, but House Bound to Cut More Spending

If the House behaves in the best interests of its majority, Uncle Sugar will have to diet lest they precipitate a new credit limit "crisis".

by
Dan Miller

Bio

August 4, 2011 - 12:00 am

Both houses of the Congress have now approved the new debt limit bill, the text of which is available here. President Obama has signed it. It is seventy-four pages of complex legislative language with multiple cross references to, and in some cases amendments of, other laws. It cannot be fully understood without analyzing those. It seems unlikely that most CongressCritters who voted on it understood or even read it in the very short time provided.

Regardless of its complexity, it is apparent that by approving the bill the House of Representatives did not bind itself to refrain from cutting spending substantially more than the bill requires.

The House passed a budget for fiscal 2012 on April 15:

The U.S. House of Representatives on Friday passed a budget plan for the next fiscal year that would cut federal spending by around $6 trillion (3.67 trillion pounds) over a decade and includes controversial long-term cuts to healthcare programs for the elderly and poor.

By a vote of 235-193, the Republican-controlled House passed the budget for fiscal 2012, which starts on October 1. It has been attacked by President Barack Obama and Democrats in Congress for cutting social programs while also reducing the tax burden for high-income earners.

The Senate has not approved that budget and is not likely to do so. Nor has the Senate passed any budget for more than two years.

The Senate, but not the House, is bound by Section 106 of the debt limit legislation, titled “Senate budget enforcement”; there is no House budget enforcement provision, presumably because none was thought necessary. Under Section 106, the Senate is bound as follows:

[T]he allocations, aggregates, and levels set in subsection (b)(1) shall apply in the Senate in the same manner as for a concurrent resolution on the budget for fiscal year 2012 with appropriate budgetary levels for fiscal years 2011 and 2013 through 2021. (emphasis added).

The Senate (but not the House) is similarly bound for fiscal 2013. The referenced subsection (b)(1) provides in relevant part:

(b) COMMITTEE ALLOCATIONS, AGGREGATES, AND LEVELS. –
(1) As soon as practicable after the date of enactment of this section, the Chairman of the Committee on the Budget shall file –

(A) for the Committee on Appropriations, committee allocations for fiscal years 2011 and 2012 consistent with the discretionary spending limits set forth in this Act for the purpose of  enforcing section 302 of the Congressional Budget Act of 1974;

The section goes on to deal with baseline and other adjustments for subsequent years; however, with new Congresses and new presidents, no attempt to do that will be effective.  The Senate cannot, consistently with the debt limit legislation, exceed the prescribed spending limits in the short term. However, there seems to be nothing in it to prevent the House even from voting to nullify its earlier budget for 2012 and from voting on a new one, with spending cuts it failed to make in the April 15 budget. Hence, the House retains the authority to grant, cut, or deny whatever appropriations for fiscal 2012 (and, of course, for 2013) it chooses, provided only that its largess does not infringe upon the prescribed caps: it can’t appropriate more, but can and should appropriate less, than the caps authorize.

Contrary to the thesis of this PJMedia article, the debt ceiling can be a ceiling on spending, not a floor; it will not be a floor if a majority of the members of the House act in accordance with their own best interests by appealing to fiscally conservative voters in 2012. This means that in the absence of generous appropriations, passed by the House, the Obama administration will have to borrow money to finance its excesses for which appropriations are not made. That may be difficult.

Under Article I, Section 9, of the Constitution: “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law (emphasis added).”  It does not contemplate the expenditure of borrowed funds to meet government expenses not authorized by the Congress. It does not say:

No Money, with the exception of funds borrowed pursuant to Congressional approval, shall be withdrawn from the Treasury, but in Consequence of Appropriations made by Law.

However, even if Article I, Section 9, is (erroneously) interpreted to mean what my fictitious Article I, Section 9, says, under the debt limit legislation the newly authorized additional borrowing authority will result in substantially more money being borrowed than apparently contemplated if appropriations are as slim as they should be;  to the extent that lenders remain willing to lend more money it will be borrowed, probably at higher interest rates than at present, and spent.

I argued on July 29 that the donkey had pinned the tail on itself. The donkey is already squirming and President Obama, following Senate passage of the bill, continued to call for more taxes on “the rich”:

“We can’t balance the budget on the backs of the very people who have borne the biggest brunt of this recession,” Obama said in appealing for measure to raise more revenue from the wealthy and corporations. “Everybody is going to have to chip in. It’s only fair. “That’s the principle that I will be fighting for in the next phase of this process.”

Recent events suggest that the donkey should not feel comfortable. On the day after the House approved the debt limit deal, the anticipated euphoria on Wall Street was dampened by fears of rising interest rates, presumably triggered by increases in interest the government will have to pay for new borrowing due to a credit risk downgrade or even a warning. On that day, the Dow closed down 265.87 points (-2.19%) and the NASDAQ closed down 75.37 points (-2.75 percent) — hardly auspicious signs. On August 1:

Obama administration officials were not sure if the initial cuts of $917 billion over the next decade, with an additional $1.2 trillion to $1.5 trillion coming in a second step, would be enough to avoid a downgrade.

“We certainly hope that that sends the signal that Washington is getting its act together and dealing with these tough issues,” Carney told reporters.

Standard and Poor’s has been rather less sanguine:

The firm indicated in July that it would downgrade the U.S. credit rating if a debt-ceiling deal did not cut spending by about $4 trillion over the next 10 to 12 years. For that reason, Rajadhyaksha said S&P could be the only major ratings agency to downgrade if the deal is approved.

Gary Schlossberg, senior economist at Wells Capital Management in San Francisco, agreed.

“If you took them at their word over the last couple of months, this clearly falls short of what they were looking for,” Schlossberg said.

The debt limit legislation does not come even close to approaching a $4 trillion cut. The United States will not become Big Rock Candy Mountain and Wall Street knows it:

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Rasmussen reported on August 2nd:

On the morning after official Washington patted itself on the back for a deal to raise the debt ceiling, investor confidence has fallen to the lowest level since March 24, 2009.

The Rasmussen Investor Index, which measures the economic confidence of investors on a daily basis, fell five points on Tuesday. At 68.9, investor confidence is down seven points from a week ago, down 12 points from a month ago, and down 17 points from three months ago.

Just 16% of investors believe the economy is getting better while 63% say it is getting worse. At the beginning of the year, they were evenly divided on that question.

If the House refuses to appropriate funds needed for further implementation of obnoxious and wasteful schemes for fiscal 2012 and 2013, the Obama administration will have to discover ways, contrary to Article I, Section 9, to borrow lots of money within the new debt limit for those purposes. However, by doing so it is likely to bump up against another debt ceiling sooner rather than later, possibly before the 2012 elections — the main thing the Obama administration sought to avoid.

There are many targets for spending reductions. As I observed here in January of this year:

There are so many places to start that even to select a few for the defunding prize or even for “honorable mention” would be a Herculean task. Still, a few stand out. The Environmental Perversion Protection Agency (EPA), the Federal Statutory Abuse Communications Commission, the Department of Religious meddling Justice and now the Department of Obesity Reduction Agriculture would be good starts. So, to the extent that such is possible, would be the United in destruction of civilization Nations, which is about to have a conference supporting racism and has strayed so far from its course as anticipated by Winston Churchill that it resembles his dream less than does a horse resemble a snake.

As I had argued in another article last November:

If the new Congress takes its obligations and powers seriously by initiating many separate, agency specific, selective, and detailed appropriations bills, the Obama administration will be between a rock and a hard place indeed. “No funds hereby appropriated for the ___ (insert here EPA, FCC, Department of Justice, Department of Education, etc.) shall be used to … ”. For example, if the separate EPA appropriations bill were to prohibit the use of any funds thereby appropriated for the promulgation, adoption, or enforcement of any rule or regulation limiting carbon dioxide emissions to less than some stated number of parts per million, the president could veto it. He would not, because that would in effect shut down the entire EPA; that would hardly serve his objectives and would visibly irritate mainly his remaining comrades. Indeed, it would have almost but not quite the same effect as abolishing the EPA outright, which the Congress without a veto proof majority could not do. Unlike the situation with a massive omnibus appropriations bill, a veto won’t shut down the entire government and won’t work because the inoffensive parts of the government could continue to function. Refusal of the Democratic Party-controlled Senate to approve the House bill wouldn’t work either, for the same reason.

There is no apparent reason why these same principles should not apply starting today.

Although the debt deal passed the House of Representatives with substantial Republican support — even from some terrorists Taxed Enough Already folks who remain a powerful force to be reckoned with — there is ample reason to think that many of them will refuse, adamantly, to go along with the grant of more than slim appropriations for the near future.

Stinginess in the House is the key to mucking out the whole pig pen. Having voted for the deal because it was seen as the best one possible in the circumstances, Colonel West and others will be hard pressed to vote to appropriate funds for the government to spend wastefully and counterproductively hereafter. Assuming that they want to be reelected in 2012, that seems likely to be true of many others on the Republican side who voted for the deal.  Speaker Boehner and the rest should and probably do realize that they are now in bad odor and that if they don’t behave (as distinguished from act theatrically) as fiscal conservatives from this point forward they will be looking for something else to do in 2013.

The House of Representatives is scheduled to recess in a few days:

The August recess is not only the longest break Congress takes all year, but also its most important, as members spend extended time in their district and the political media searches for emerging storylines.

Polling suggests that members are headed back to districts packed with people who believe Congress is failing them.

A new Washington Post/Pew Research Center survey asking people to pick a single word to describe the debt debate showed that “ridiculous, “digusting [sic] and “stupid” where [sic] the most often mentioned. That’s not exactly a ringing endorsement of the way Washington went about is [sic] business of late.

Wouldn’t it be better — for our CongressCritters themselves — if they were to cancel or truncate the recess, pleading the press of getting spending under control, as a productive way to avoid being ridden out of Washington on rails by voters mad as hell when they venture back to face them? Wouldn’t they find it in their own best interests, and maybe even incidentally good for the country, if they took the heat in Washington to get the tedious work of cutting spending done? That, better than receiving custard pies or worse thrown in their faces in August, should help them to remain in the Congress when a new Congress is seated in early 2013.

Dan Miller graduated from Yale University in 1963 and from the University of Virginia School of Law in 1966. He retired from the practice of law in Washington, D.C., in 1996 and has lived in a rural area in Panama since 2002.
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