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Government shutdown and debt ceiling FAQ

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by Jon Roland, Constitution Society

There have been a number of Frequently Asked Questions pages posted on the Net concerning the government “shutdown” and debt ceiling, which provide commonly conceived “answers”, but it seems fitting to provide some more constitutionally enlightened answers to some of those questions:

  1. If there is no congressional appropriation, how can the government keep spending money on “essential” operations? Constitutionally, it can’t. There is no constitutional exception for “essential” operations. If government complied with the Constitution, it would have to shut down all spending and proceed entirely using unpaid volunteers, as it did in the beginning.
  2. How can some spending be outside the appropriation process? Constitutionally it can’t. It is done on the rationalization that the Constitution does not explicitly forbid setting up “independent” agencies that may be “self-funded” from their own taxes or fees, or forbid multi-year appropriations for other than the Army, but the Constitution doesn’t authorize those things, either, and one cannot logically infer a power from the omission of a prohibition on its exercise. The design established by the Constitution requires all revenues go into the Treasury, and all disbursements to be made under appropriations that may not extend beyond the terms of Congress, which are two year periods.
  3. Why can’t government workers volunteer? Constitutionally, there is no authority to stop them from doing so, although there is a 19th century criminal statute that forbids it. The statute could constitutionally forbid volunteers to use government-owned assets, but the only authority to forbid voluntary action would be to fire them, and they could then volunteer as non-employees using their own resources. Of course, if government prosecutors are “furloughed” there would be no one to enforce the statute. Somehow, one suspects it is a dead letter.
  4. So who is to blame for the shutdown? The Constitution requires agreement by both houses of Congress and the President to authorize spending, from one year to the next, and not not authorize “permanent” appropriation for anything, so the default is to not spend and the fault belongs to those who insist on spending over the objections of one of the other components, in this case the House of Representatives, which has superior authority as the only house that may initiate spending bills. The compromise position would be to cut all spending not agreed to by all the components.
  5. Why would the government “default” if the debt ceiling is not raised? Depends on what you mean by “default”. The way most economists use that term, it would only be failure to pay interest on lawful bond debt, and principal on such debt when it comes due, and there is more than enough revenue from taxes to pay those things, so from that viewpoint, there is no risk of “default” if the debt ceiling is not raised. However, the way the Administration and its supporters in Congress are using the term, it is any and all obligations or expectations of payment, from payment of medical claims on Medicare to vendors of goods and services to subsidies and grants to key constituents. That is a matter of not wanting to incur the political costs of ending patronage.
  6. What would happen if the debt ceiling were not raised? The government would have to immediately stop all spending in excess of revenues, which would be a reduction of about 30%. That would mean ending almost all entitlement spending, on things like Medicare, Medicaid, farm subsidies, food stamps, housing subsidies, education subsidies, and payments to government-funded pension funds. Arguably Social Security benefits could continue as long as enough FICA taxes were collected, but since those taxes are not keeping up with benefits, those benefits would have to be reduced, and continue to fall. Advocates of more spending and borrowing make the Keynesian argument that a sudden cutoff would be disastrous to the economy. There would almost certainly be a shock from any sudden change in government spending, and many enterprises that have grown to depend on it might go bankrupt, but reduced government borrowing would also make more investment funds available to other things, like expanding businesses, creating jobs, and investing in new technologies, so after a period of adjustment, the net effect is likely to be beneficial to the economy.


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