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At Least My Dog Didn’t Die This Weekend

December 19th, 2010 . by economistmom

So the first time the Bush tax cuts were signed into law (by President George W. Bush), my beloved golden retriever “Sunny” (short for “Sunshine”) unexpectedly and very suddenly died in my backyard under her favorite tree.  This was on a rainy Saturday over Memorial Day weekend, 2001–making it a miserable, tragic weekend all around.

I’m relieved to report that at least my dog didn’t die this time around, now that President Obama has signed them into law and turned them into the “Obama tax cuts.”

From the signing ceremony (video above), there’s a lot of happy talk about “bipartisanship” and “compromise.”  But it’s easy to “compromise” when you don’t have to give up anything–when instead you just have to stop resisting what the other side wants.  As Vice President Biden explains (emphasis added):

The famed 18th century British statesman, Edmund Burke, once said, “All government, indeed every human benefit and enjoyment, every virtue, and every prudent act, is founded on compromise and barter.”  Today, we have a crystal clear example of what he meant.

This package — this package is a result of leaders from both sides coming together to act on behalf of the American people at a time they need it most…

It means accepting some things we don’t like in order to get the job done for Americans as needs to be done.

But that’s not exactly the “barter”–or “give and take”–kind of “compromise.”  It’s the easier “take and take” kind that policymakers have mastered over the past decade that has resulted in such fiscally irresponsible policymaking, where seemingly-free deficit financing becomes the easiest “bipartisan” way out of gridlock.  As I’ve said before, it’s not mutual sacrifice; it’s mutual grabbing.

The President seems to know this was the easy part–”compromising” on a tax cut package that gave him all the deficit-financed tax cuts he wanted in exchange for just accepting a few more the other side wanted, too.  He said (emphasis added):

[W]e’ve got to make some difficult choices ahead when it comes to tackling the deficit. In some ways, this [tax cut deal/"compromise"] was easier than some of the tougher choices we’re going to have to make next year.

Yes, a LOT easier.  We can do this kind of policy making with our eyes closed.

But like I said (optimist that I am), at least my dog didn’t die.

32 Responses to “At Least My Dog Didn’t Die This Weekend”

  1. comment number 1 by: Gipper

    Economistmom,

    Well said. Neither side sacrificed much. A Real Deal would involve cuts to entitlement programs that Democrats covet, and increases in tax revenues as a percentage of GDP that Republicans abhor.

    Because healthcare is the future’s biggest driver of budget woes, it’s important that it be tackled first. Here’s my suggestion: eliminate Medicaid at the federal level–gradually. Democrats say “ouch!”

    Turn Medicaid over to the states that have balanced budget requirements. They will figure out how to manage it in a manner that is fiscally sound because they have no choice. We can benefit from their experimentation and diversity instead of one-size-fits-the-entire-nation program regulations.

    Republicans in turn agree to adopt Bowles-Simpson tax plan, gradually, as Medicaid is phased out. 21% of GDP is a big increase over the Obama tax rates (I just love writing that). Republicans say “ouch!”

    That’s a Real Deal. It’s a deal that real deficit hawks should be supporting. But the deficit chicken hawks on both sides of the spectrum persist in ideological positioning.

    The left thinks that because demographics of the nation are changing toward more old people, it’s OK to saddle taxpayers with heavier burdens. Nice non sequitur, but not compelling, especially when we’re broke. The mathematical assumptions of the New Deal and the Great Society are rotten to the core. Charitable impulses founded upon deceit and error sow the seeds of chaos. Under current law the federal government will consume at least 30% of GDP and the left has not shown us the plan for paying that tab.

    The right says that over the past 30 - 50 years, tax revenues have averaged around 18% of GDP and that’s as high as it ever should get, short of another WWII. That’s a fine statistic that ignores that spending today represents a cost that must be paid by taxation today, tomorrow, by inflation, or future cuts in spending. We’re all waiting for those proposals to be unveiled to an eager electorate.

    Now my Real Deal doesn’t “solve” the problem once and for all. But it is a good first round. More cuts are necessary and more tax revenue will be required. But the pain of such a deal will so shake the ideological rigidity of both the left and the right, that it will discombobulate the Barney Franks and the Jim DeMints, the Grover Norquists and the Paul Krugman’s, and all of the other immovable objects and irresistible forces of the political universe who are driving us off a cliff.

  2. comment number 2 by: Vivian Darkbloom

    Gipper,

    Medicaid is currently a federal/state program (though mostly federal in funding). So, to be totally accurate, you would have to say “turn Medicaid completely over to the states”.

    Nevertheless, the thought, and the rationale behind your suggestion, deserve far much more attention by those who seriously wish to keep government spendng more in line with our ability to pay for it. The trajectory of our federal government deficits has been fairly consistent with the trajectory of the expansion of the federal powers under the gradually eviscerated Article X of the Constitution.

    I have always believed that decisions are best taken as close as possible to those who are affected by it. This has benefits aside from budgetary, but with respect to the latter, I strongly believe that if forced to currently pay for what they consume, taxpayers will think much harder about approving government spending. There may be a good phrase for this—perhaps “require the beast to pay cash for his meals” or something like that.

    Of course, the states have not done a very good job of managing their finances, either. But the problems they are encountering have to do with defective accounting for pension plans and spending for programs thrust upon them by the feds. And, the states are dealing faster with the spending problems than is the federal government is. Also, there is the expectation that they will be bailed out by federal taxpayers. The latter is a “too big to fail problem” that would definitely need to be addressed.

    I was pleased to see Economist Mom acknowledge that, with the stroke of his pen on Friday, President Obama has turned those “Bush tax cuts” into “Obama tax cuts”. I think it is going to be good fun to see how other pundits deal with this issue. I suspect that Obama will continue to claim he was “taken hostage”, but that would be a rather whimpy thing for the POTUS to say. If they continue in that vein, further comparisons might be needed to the situation when that last happened, that is, when Carter was taken hostage by Iran. For most voters, that was less flattering to the abductee than to the abductor.

  3. comment number 3 by: rjs

    among other crises, ive been watching europe…

    it seemed for a whle that our problems were similar to those of ireland or spain (housing bubble, insolvent banks)…but they just took a very greek turn….

  4. comment number 4 by: Arne

    “They will figure out how to manage it in a manner that is fiscally sound because they have no choice.”

    We all know that fiscally sound management requires states to have reserve accounts, but anti-tax activists target the “excess” receipts during boom times and progressives want improved programs. The same type of “compromise” that Diane is writing about ends up with states having inadequate reserves.

    Some programs highly susceptible to recessions should not be left to the states.

  5. comment number 5 by: AMTbuff

    It seems to me that ending Medicare would be more morally defensible than ending Medicaid. People who lose Medicare have savings, income, and ultimately Medicaid as a backstop. People who lose Medicaid have only private charity and mandatory emergency care.

    Medicare is the unaffordable part of the welfare state. The rest of it we can probably find the money for, a la Bowles-Simpson.

  6. comment number 6 by: SpendingHawk

    AMTbuff:

    Who is talking about eliminating Medicaid? I thought that we’re talking about taking it out of the federal budget and giving states complete responsibility.

    Arne, in CA it’s the Democrats who have raided the reserve funds prior to the recession to pay off public sector union cronies. At the state level, Republicans aren’t the problem.

    People’s long-term retirement plans are tied to Medicare so any transition is far more complicated than Medicaid that generally goes to able-bodied adults and their children.

    Medicare is the largest and most important part of the budget to fix, but that doesn’t mean it should be the first thing to fix. Politically, it is too difficult. Before tackling Medicare, the parties must first lose their ideological “virginity.” Medicaid is the best place to start for that purpose.

  7. comment number 7 by: Shadowfax

    It was embarrassing to see this utter lack of leadership from both parties. The President should have simply announced that he would veto any attempt to extend the Bush tax cuts. I highly doubt the Republicans would have filibustered an extension of unemployment benefits. The GOP leaders have said multiple times they would have looked for cuts elsewhere to offset the expense, which is the right thing to do.

    There is never a “good time” for a tax hike and the evidence is overwhelming that there are better ways to stimulate the economy than a tax cut. Further, we all know tax cuts don’t pay for themselves, a fiction which the President should be hammering home, as a sizable number of folks believe they do.

    Real leaders articulate a vision and work to get the buy-in of the citizens, rather than saying “Darn, the status quo is dug in deep so I have to do what they let me.”

    I’m beginning to think that until forced by the credit markets, we will not solve this problem. In other words, until Moody’s or S&P downgrades our credit ratings and interest rates on Treasury bonds jump dramatically, we will continue to have big government spending and small government taxes. I don’t know why Moody’s and S&P are waiting, as the U.S. has absolutely no plan to do anything about this issue.

    This is a huge risk to savers, who will see the value of their savings inflated away.

    Regarding the notes above, I like the creativity of giving federal healthcare responsibility to the states, with the exception of leaving the payment system centralized. We must tackle the healthcare cost drivers: obesity, defensive medicine, a shortage of doctors and nurses, incentives that reward more care instead of better care, redundant payment systems, and end-of-life care.

  8. comment number 8 by: Gipper

    Shadowfax,

    If I were betting, then I’d share your pessimism. However, this blog is a place where we can let our “constructive” fantasies reign.

    I’d like to see others dream up compromise scenarios. All you Democrats out there. What would you be willing to sacrifice for the sake of controlling the deficit to get Republicans to consent to 21% of GDP going to federal tax revenue?

    My experience has been that Democrats are limited to moaning about how Republicans won’t consent to ante up tax revenue to pay for the existing welfare state. Democrats are deficient on offering significant cuts as a step toward compromise. I’d put Economistmom at the top of that list.

    In economics, we measure the value of something by what you’re willing to give up to acquire it. We can measure how important deficit reduction truly is for Economistmom and others by the number and value of programs they are willing to cut to achieve a deal.

    All I hear so far is posturing and telling historical tales about how it all went wrong back in 2001 when the dog died. The dog isn’t coming back to life, and Obama just took ownership of the tax schedule. So now what?

  9. comment number 9 by: SteveinCH

    It’s also worth pointing out in the same vein of Gipper’s reply that Federal spending in 2001 was a “mere” 18.5% of GDP. I get the aging population and all but are people on the left really arguing that an aging population requires an incremental 6 percent of GDP over the course of a decade?

  10. comment number 10 by: Shadowfax

    @Steve in CH: I thought you’d like this summary from the CBO historical tables via Wikipedia. I put a nice “cause of change” diagram out there as well in the United States Federal Budget article.

    “According to the CBO, the U.S. last had a surplus during fiscal year (FY) 2001. From FY2001 to FY2009, spending increased by 6.5% of GDP (from 18.2% of GDP to 24.7%) while taxes declined by 4.7% of GDP (from 19.5% of GDP to 14.8%). The drivers of the expense increases (expressed as % of GDP) are Medicare & Medicaid (1.7%), Defense (1.6%), Income Security such as unemployment benefits and food stamps (1.4%), Social Security (0.6%) and all other categories (1.2%). The drivers of tax reductions are individual income taxes (-3.3%), payroll taxes (-0.5%), corporate income taxes (-0.5%) and other (-0.4%). The 2009 spending level is the highest relative to GDP in 40 years, while the tax receipts are the lowest relative to GDP in 40 years. The next highest spending year was 1985 (22.8%) while the next lowest tax year was 2004 (16.1%).”

  11. comment number 11 by: SteveinCH

    Right so at most, less than half of the increase is due to demographics and most of the tax change is recession driven.

    And actually, the 2009 spending level is the highes in more than 60 years (since WWII) and excluding WWII is the highest in history.

    And while taxes as a percent of GDP are project to recover, spending is not projected to meaningfully decline by either the President’s budget or the CBO.

  12. comment number 12 by: Shadowfax

    @ Gipper: Here are my favorites and the size of deficit reduction (we are chasing a 10% GDP deficit)

    1) Let the Bush tax cuts expire. 2.0% GDP
    2) Gas taxes ($1-2/gallon). 0.5% GDP
    3) Remove the SS payroll tax cap. 0.5% GDP
    4) Put defense back to Clinton levels. 1.5% GDP
    5) Limit the SS COLA to inflation. 0.5% GDP
    6) Ration end of life care. 0.5% GDP
    7) Reduce non-def discret. spend. 0.5% GDP
    8) Raise retirement age. 1.0% GDP

    So far, this gets us 7.0% GDP, a “sustainable” budget. If the President thought tax breaks and spending hikes were a tough compromise…

  13. comment number 13 by: SteveinCH

    Shadowfax, the target of 10% is wrong. According the CBO, under current policy, taxes will hit about 19% of GDP by 2020 based on recovery and real bracket creep. As such, the target is nothing like 10 percent.

  14. comment number 14 by: Shadowfax

    @Gipper: I meant that we have a 10% of GDP deficit that we want around 3% of GDP or lower. We need to find about 7% of GDP in savings to keep the budget sustainable; the above should keep us in the ballpark for the next 50 years or so.

  15. comment number 15 by: Gipper

    Appeal to all budget wonks for an answer to this hypothetical:

    The answers to these questions could be pertinent to issues that will arise as the showdown over the vote on the debt ceiling approaches.

    Right now, tax revenues fund about 60% and borrowing about 40% of the total expenditures.

    Would it be legal for a President to refuse to borrow money to pay for appropriations?

    Could the President then use his discretion to prioritize those programs he wished to support with ongoing cash flows from tax revenues? For example: Defense 23%, SS 20%, Medicare, 13%, Interest on Debt 5%, DOJ, FAA, Courts and other assorted health and safety agencies another 2 – 3% = 64 – 65% of appropriations. President could say make cuts in Defense not related to war fighting, and fund the other programs on the list.

    Depts. Of HHS, Agriculture, Education, Energy, Transportation, Labor (excepting those agencies related to health and safety inspections like FAA) are shut down.

    Would this be constitutional?

    Does Congress have the authority to pass appropriations bills or other laws that require the Treasury to borrow money to make up any shortfall in tax revenues?

    Would it be possible for a President to decide to borrow 20% instead of 40% of total appropriations to essentially force a 20% cut in spending?

    BTW, nice job Shadowfax. Although, my preference is to actually shut down a program so that it may now easily spring back to life. I’m sure Republicans would demand something like than rather than general directives to cut a certain percentage from categories of spending.

  16. comment number 16 by: Gipper

    I think I might have an answer to the questions I posed. Curious to learn if the budget wonks out there agree with me.

    The Second Liberty Bond Act of 1917 established the first debt limit. Prior to that Congress (In accordance with the power in Article I, Sec. 8 “To borrow money on the credit of the United States”) used to take separate votes on bond issues.

    In 1939 Congress finally adopted a single debt limit and gave the Treasury the discretion to issue whatever kinds of debt instruments at whatever durations it saw fit as long as it stayed under the debt limit.

    By giving the executive branch this discretion, the executive branch also has the ability to refuse to borrow.

    If the President refused to borrow enough money to fully finance all appropriations, then Congress could always revert to its former practice of voting for specific bond issues to bring funds into the Treasury. Once money is in the Treasury accounts, the President cannot refuse to spend it, according to the Impoundment Laws passed during Nixon’s presidency.

    A majority vote of Congress is all that is required to issue debt. President’s signature is not required.

    However, I do not believe that Congress could compel the President to borrow money. It can only compel the President to spend whatever money is in the Treasury’s accounts. It’s Congress’ responsibility to ensure that there is enough money available to fund its appropriations.

  17. comment number 17 by: Vivian Darkbloom

    Gipper,

    The issue you raise is related to the issue of whether the President can line-item veto legislation, use recission to force Congress to reduce spending or to impound funds that have been appropriated (caled “impoundment”. The line-item veto has been ruled unconstitutional. Recission and impoundment are restricted by various federal statutes, primarily the Budget Act. Here’s a brief article on those issues: http://law.onecle.com/constitution/article-2/37-impoundment-of-appropriated-funds.html

    Whether presidential impoundment of appropriated funds (refusal to spend) is constitutional, is murkier. It has never really been tested under the separation of powers clause. Bartlett over at CG+G has argued that impoundment is constitutional. But, Bartlett is no constitutional scholar (I don’t know what he is) and I think he is likely wrong. http://www.capitalgainsandgames.com/blog/bruce-bartlett/1745/why-not-impoundment

    The issue you raise, however, is slightly different. You ask if the President can refuse (because Treasury is part of the Executive branch) to borrow money. Here, the President is not refusing to spend appropriated funds (the funds are not there). I suspect this would be subject to less constitutional objection than merely refusing to spend. But, I don’t think that is a feasible solution. With respect to specific legislation requiring spending, Congress does not direct the President to go out and borrow money—and money is fungible, so it (borrowing) can’t be allocated to specific programs. Theoretically, the President could refuse to borrow and shut down the entire government, but I don’t think this type of suicide is likely to be experimented with.

  18. comment number 18 by: Gipper

    Vivian,

    My point was that the President wouldn’t have to shut down the entire goverment. He would only have to shut down that fraction of government paid for by ongoing tax collections.

    Also, if President decided to borrow 20%, instead of 40%, of appropriated spending, then he could shut down 20% instead of 40% of the government. It is a matter of degrees. But the point is that the President has a lot more leverage in these scenarios if he wished to exercise it. A future Republican President may actually do this.

    If Depts. of Agriculture, Education, HHS, Transportation, and Labor shut down, I and many other tax-contributors would be jumping for joy. The tax-takers would be devasted. That’s hardly a shutdown of the entire government.

    State tax rates would increase on average to take up whatever percentage of the abandoned federal agency duties they wish to continue, but at least under state tutelage, the budgets would be balanced in the near term.

  19. comment number 19 by: SteveinCH

    I think Vivian’s point is that his actions at that point would be unconstitutional. Whether there is money or not, once the President cancels specific programs, he’s passed his constitution authority.

  20. comment number 20 by: Arne

    “I and many other tax-contributors would be jumping for joy.”

    Air traffic control ends at state boundaries, as does highway maintaintence. When you visit another state, you don’t know whether the meat has been inspected. A diploma from another state is a crap shoot. Swell.

  21. comment number 21 by: Gipper

    Arne,

    I wrote “Depts. Of HHS, Agriculture, Education, Energy, Transportation, Labor (excepting those agencies related to health and safety inspections like FAA) are shut down.” If you want to be snarky, at least be smart and thorough about it.

    SteveinCH, the President wouldn’t “cancel” speficic programs as in repealing legislation, he just refuses to proactively seeking to borrow funds to keep them operating as long as tax collections are inadequate. I don’t see the consitutional problem. If there isn’t enough money, then someone has to decide which programs maintain operations. Surely, you wouldn’t prioritize funding for school lunch programs over paying interest owed on the debt or pay for soldiers in the battlefied?

    Under Article I, Sec. 8, it’s up to Congress to make a positive act of borrowing to fund the Treasury if the President refuses to take the initiative that Congress delegated to him.

  22. comment number 22 by: Vivian Darkbloom

    Gipper,

    My point was that money is fungible and that borrowing used to finance government spending is also fungible—it cannot easily be allocated to one specific program. I think once you rather artificially say that you are borrowing for one program but not the other, it is the functional equivalent of the President failing to execute legislation passed by Congress (and approved previously by the executive branch). This would be a violation of the separation of powers clause and the budget statutes, I think. The other alternative (having better constitutional chances in my view) would be for Treasury to refuse to borrow funds. While potentially constitutional, that would be political suicide because much of the government would be shut down (nearly half in my estimate because we borrow almost half of our spending needs).

    Also, I wonder what this would do to the bond market. I suspect that such a move would severely depress prices on outstanding obligations (thus increasing the implied interest rate) in part because we rely on borrowing to satisfy current interest payments as well as government programs. When borrowing inevitably would resume, I suspect we would face higher interest rates on any resumed borrowing.

    I have not looked at the specific text of recent debt ceiling limit bills; however, I am almost certain they authorize an increase in the deficit but do not mandate it.

  23. comment number 23 by: SteveinCH

    Arne,

    Legally it’s the same thing. If Congress has apportioned the money, the President cannot decide which money not to spend. As Vivian said, he could shutter the government but not specific parts of it.

  24. comment number 24 by: Arne

    Gipper,

    While that is what you said at 1:20, later, at 12:44, you implied that better yet you could shut them down entirely and shift the responsibility to the states. You know best whether that is what you really meant, but that is still the way I read it.

  25. comment number 25 by: Gipper

    Vivian,

    If President directs Treasury not to borrow enough money to fund all spending appropriations, then step 2 is to decide which programs to cut.

    We know Presidents can do this because Bill Clinton had to do prioritize which agencies were funded during the 1995-1996 confrontation with Gingrich. There were no court challenges to his decision to fund the FBI and the military while the Natl Parks and Washington monument were shut down.

    I don’t believe that you need a bill to raise the debt limit. I think it can be done with a resolution passed by both houses, which is why I don’t believe it can be filibustered in the Senate. Article I, Sec. 8 makes it clear that Congress has the power to borrow money. However, it cannot spend the money it borrows without appropriations bills.

    My theory is that Congress can go back to what it used to do prior to 1917 before there was a debt limit. If the President refuses to use his discretion to borrow money under the debt ceiling, then Congress can take a specific vote directing the Treasury to borrow a specific sum of money by certain dates with specific maturities.

    Once money is sitting in the accounts at the Treasury, then the President has no excuse not to spend it, unless he wants to trigger an Impoundment controversy.

    Bond Markets would love it, as long as interest on the debt and principal is getting priority. It would demonstrate a seriousness in curtailing spending and the deficit that they haven’t seen in decades.

    Arne,

    Yeah, in the space of a couple hours, I completely changed my mind about the whether the health and safety functions of the federal govt should be funded. Only you know whether you believe that drivel for an excuse you wrote in your last post about divining my intentions. More likely, you just didn’t read my earlier post, and you can’t admit that you missed it. If you want to deceive yourself, then go ahead. Just don’t try to deceive us while you’re at it.

  26. comment number 26 by: Gipper

    Vivian,

    Correction. You probably need a bill to raise the debt limit, but Congress would only need a resolution of both houses to direct Treasury to borrow a specific sum of money.

    The reason for the difference is that the debt limit is a law delegating authority to the President to borrow money at his discretion within the debt limit. A resolution by Congress to borrow a specific amount of debt doesn’t delegate any power so no bill is required.

  27. comment number 27 by: SteveinCH

    Gipper,

    Just because there were no challenges doesn’t mean it is Constitutional, particularly since the Clinton shutdown was seen as temporary and what you are proposing would not be.

    Trust me, it would be challenged in court. Based on my read of existing precedent, it would not be allowed.

  28. comment number 28 by: Gipper

    SteveinCH,

    I’m not an expert in this area of constitutional law, but I’m interested in the “existing precedent” on which you are basing you comments.

    No sane judge would ever say that the President would have to shut down the entire government if any one part of the government were not funded due to a lack of cash. It strains credulity.

    What constitutional principle is being violated if a President decides it’s better to operate as much of the government as posssible rather than closing all of it down?

    Also, I see a major violation of separation of powers if a judge thinks the President must commit an act (borrow money) that is not required under the constitution. Article I, Sec. 8 gives that power to the Congress not to the President.

    I know Judge Reinhardt in the 9th District Court would probably find a way to overlook the plain text of the Constitution, but I am hoping that the commentors on this blog were smarter and more honest.

  29. comment number 29 by: Gipper

    I’m not an expert in this area of constitutional law, but I’m interested in the “existing precedent” on which you are basing you comments.

    No sane judge would ever say that the President would have to shut down the entire government if any one part of the government were not funded due to a lack of cash. It strains credulity.

    What constitutional principle is being violated if a President decides it’s better to operate as much of the government as posssible rather than closing all of it down?

    Also, I see a major violation of separation of powers if a judge thinks the President must commit an act (borrow money) that is not required under the constitution. Article I, Sec. 8 gives that power to the Congress not to the President.

    I know Judge Reinhardt in the 9th District Court would probably find a way to overlook the plain text of the Constitution, but I am hoping that the commentors on this blog were smarter and more honest.

  30. comment number 30 by: SteveinCH

    The precedent is about the President refusing to spend the money that Congress has appropriated.

    My point is that were the President to refuse to borrow the money (which he could do), he would have to shut the whole government down, not a part of it because the money would be lacking for the government to operate. The President cannot pick and choose as that amounts to recision.

  31. comment number 31 by: Vivian Darkbloom

    Gipper,

    I’m not sure I follow your logic. You wrote:

    “If President directs Treasury not to borrow enough money to fund all spending appropriations, then step 2 is to decide which programs to cut”.

    Perhaps it would be useful to use a concrete example. Suppose that the President thinks we are spending (and therefore borrowing) $100 billion too much. The President identifies $100 billion in ag subsidies (previously legislated by Congress and approved by the President) he would like to cut. In some manner (let’s say an executive order) the President directs (1) the Treasury to reduce borrowing by $100 billion; and (2) The Dept of Ag to reduce spending by $100 billion.

    As a practical matter, you should recognize that not only are the sequence of events irrelevant, but your step 1 is not necessary—if the President reduces spending by $100 billion in this fashion, the need to borrow is automatically reduced by $100 billion. The President need not instruct Treasury to do anything.

    So, the real issue here is whether the President can unilaterally cut spending as previously directed by Congress. The answer per current statute is basically “no”. If the President wants to rescind (or defer) spending, he may do so, but only with the consent of Congress as set out in the relevant statutes. See discussion of recission, deferral, etc in the following CRS Report on the Budget Process:

    http://budget.house.gov/crs-reports/98-721.pdf

    Specifically, the CRS had this to say about deferrals (a less severe form of spending restraint than recissions):

    “At present, the President may defer only for the reasons set forth in the Antideficiency Act, including to provide for contingencies, to achieve savings made possible by or through changes in requirements or greater efficiency of operations, and as specifically provided by law. He may not defer funds for policy reasons (for example, to curtail overall federal spending or because he is opposed to a particular program).”

    “Now, the further question might be could the President constitutionally refuse to spend (and therefore borrow) in contravention of existing federal law, which requires that he go back to Congress for approval? I think not. You asked for precedent. There is no direct precedent because the Supreme Court has never squarely faced the specific issue he pose; however, the precedent that would likely be cited would be the Supreme Court’s rejection of the line-item veto in Clinton v. City of New York, 524 U.S. 417 (1998). Basically, the SCt ruled that the line-item veto was a violation of the Presentment Clause of Art 1(7). I would view attempts at rescission without Congressional approval to be the functional equivalent and that it would be struck down for the same reason. (And, I would expect Congress to strenuously object on those grounds as usurpation of its power under Art 1(8).

    There have been suggestions since to revive some form of the Presidential line-item veto; however, these suggestions all involve requiring the President to go back to Congress in some fashion in order to satisfy the constitutional requirements set forth in Clinton v. NY.

    You also wrote:

    “I don’t believe that you need a bill to raise the debt limit. I think it can be done with a resolution passed by both houses, which is why I don’t believe it can be filibustered in the Senate. Article I, Sec. 8 makes it clear that Congress has the power to borrow money. However, it cannot spend the money it borrows without appropriations bills.”

    With respect to raising the debt limit, the request to do so usually comes from Treasury as they realize they are about to run out of money. While you use the term “resolution” to refer to Congress’ grant of borrowing authority, I believe that this is, along with all other enumerated powers in Art 1(8) subject to the Presentment Clause of Art 1(7). Thus, it goes to the President in the form of a bill, the President signs it and it becomes a public law. In theory, I think the President could veto such a bill. For a history of raising the debt limit and the various Public Laws that have done it, see the following, again from the CRS:

    http://assets.opencrs.com/rpts/RL31967_20100128.pdf

    And, whether something is subject to filibuster or not (perhaps due to use of the reconciliation process) has nothing to do with the separation of powers doctrine, which is the central issue here.

  32. comment number 32 by: SpendingHawk

    Vivian,

    Great post! Thanks for sharing your knowledge about these matters. I read the linked document, and I did not see anything that directly addressed Gipper’s point.

    The report you linked stated there is “the expectation that the available funds will be used to carry out authorized activities.” Gipper is questioning the definition of “available funds.”

    I think he is saying that “available funds” are limited to tax collections, and any funds he might borrow at his discretion. You are saying that borrowing capacity would be part of the definition of “available funds,” and the President would be compelled to borrow enough money to fulfill the required appropriations, subject to the debt limit.

    Gipper is saying that the President isn’t compelled to borrow money until Debt Limit laws. However, if Congress had a separate vote to borrow a specific sum of money instead of relying upon the delegation of borrowing authority to the President, then the President could not avoid spending the money.

    I don’t think there is much daylight between your views of the matter.