Apply Give Visit Find case.edu RSS feed Find us on Facebook LinkedIn Videos on Youtube Videos on iTunes Follow us on Twitter
Loading
 

Government Shutdown and the Debt Ceiling

Update (Oct. 16, 2013)

  • The draft C.R. includes a $2.9 billion earmark for a Kentucky dam lock project.
  • House passes H.R. 2775 at approximately 10:20 pm, agreeing with the Senate amendments to re-open government and raise the debt ceiling.

Background

As Congressional approval rates near record-low levels, with polls averaging 10.5% (and as bad as 5%),¬†the political standoff between the political parties continues. At issue is the governmental shutdown (as of Oct. 1), precipitated by the failure of Congress either to pass a budget or, in lieu of a budget, continuing resolutions (C.R.s) to fund the federal government. Tangential issues related to the shutdown are efforts from the “Tea Party faction” to de-fund all or parts of Obamacare, reduce governmental spending, or add other “signature issues” to the C.R.s that would allow the government to resume operating. (Some internet commentators note that only 17% of the federal government has been shut down.) Another imminent issue is the need for the Congress to raise the $17 trillion debt ceiling– “the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations” before it might default on its obligations as Oct. 17, 2013 approaches.

Debt Ceiling Debate

Democrats argue that the debt ceiling has been raised 45 times since Reagan’s presidency, without the current “drama and delay” to extract political gain associated with negotiations over both ending the government and raising the debt ceiling. In contrast, one Republic Senator, in an interview excerpt aired on a radio program, countered that spending cuts, another concern¬†of the Tea Party and possibly other Republicans, were added to approximately 27 of those 45 increases in the debt ceiling. Democrats counter that such instances were legislation added on the debt-ceiling measures, rather than additions imposed through debt-ceiling negotiations.

Clean C.R. vs. Piecemeal Legislation

Democrats theorize that John Boehner, Speaker of the House of Representatives, is refusing to hold a vote on a “clean C.R.” (continuing resolution) that would end the government shutdown, even though there would be enough votes to pass it. The House and Senate did restore the payment of the death gratuity and funeral expenses for fallen soldiers on Oct. 10, but a “parade of horribles” resulting from the shutdown are not to be addressed piecemeal, according to Senate leader Harry Reid and others,– assistance to veterans or efforts to speed up their benefits-processing backlog, untreated cancer patients, a Headstart hiatus, etc. Press Secretary Jay Carney says that Democrats are willing to accept the budget Republicans had originally proposed, with no strings attached. Republicans note that they have proposed a bill that would mandate that incoming revenue is to be allocated first to debt service.

Default Danger

While, technically, the government can “pay its bills” until approximately Oct. 17, 2013, Mr. Carney warns that it is not wise to wait under the deadline is even nearer. There are wide fluctuations in the inflow and outflow of government funds, increasing the risk of actual default as the deadline draws nearer. Furthermore, the federal government relies on the turnover of approximately $100 billion of U.S. bonds (treasury bills) among domestic and world-wide investors each Thursday, and it does not have enough cash available if a majority of such investors wanted to “cash out.” (Tax payments (i.e. government inflow/revenue) are still due and still being collected during the shutdown, although only tax returns submitted electronically will be processed automatically.)

Among the 43 laws passed by the current Congress so far is Public Law No. 113-39, the Pay Our Military Act, which presumably allows the government to pay the U.S. military during the shutdown. Secretary Hagel also has indicated that government lawyers have interpreted the law to allow the DOD to continue to pay some civilian employees during the shutdown, as well. Another interesting law is P.L. No. 113-3, the No Budget, No Pay Act of 2013. As its title implies, this law threatens to withhold lawmakers’ pay if they do not pass a budget in 2013. (Luckily, Congressional documents are still being updated on Thomas/FDSYS during the shutdown.) No worries– there is a loophole. In addition to the tenuousness of the constitutionality of changing lawmakers’ pay during the same Congressional session that the law was passed, apparently the House and Senate can avoid the implications of the law by “approving their own budget resolutions independently of one another and still receive their paycheck[s].” Indeed, the legislators who voluntarily agreed to donate or defer their paychecks during the shutdown are being lauded. Observers, in addition to President Obama, surmised that, when all is said and done, as in past government shutdowns, furloughed federal workers will get their back pay.

CRS Analyses

As usual, the stellar efforts of the Congressional Research Service (CRS) analysts offer cogent, thorough summaries of these topics:

The Debt Limit: History and Recent Increases (Sept. 25, 2013)

Shutdown of the Federal Government: Causes, Processes, and Effects (Sept. 25, 2013)

Government Shutdown: Operations of the department of Defense During a Lapse in Appropriations (Oct. 7, 2013)

Debt Ceiling Articles

Kelleigh Irwin Fagan. The Best Choice Out of Poor Options: What the Government Should Do (Or Not Do) if Congress Fails to Pass the Debt Ceiling. 46 Ind. L. Rev. 205 (2013).

Neil H. Buchanan & Michael C. Dorf. Bargaining in the Shadow of the Debt Ceiling… 113 Columb. L. Rev. Sidebar 32 (2013).

Neil H. Buchanan & Michael C. Dorf. Nullifying the Debt Ceiling Threat Once and For All… 112 Columb. L. Rev. Sidebar 237 (2013).

Jacob D. Charles. The Debt Limit and the Constitution… 62 Duke L.J. 1227 (2013).

Shane Nichols. A Balanced Budget Amendment Fit for the Constitution… 46 J. Marshall L. Rev. 583 (2013).

Stephan Airapetian. Managing Sovereign Debt: A More Long-Term Debt-Restructuring Solution 22 S. Cal. Interdis. L.J. 385 (2013).

Neil H. Buchanan & Michael C. Dorf. How to Choose the Least Unconstitutional Option… 112 Colum. L. Rev. 1175 (2012).

Neil H. Buchanan. Why We Should Never Pay Down the National Debt. 50 U. Louisville L. Rev. 683 (2012).

Daniel Strickland. The Public Debt Clause Debate. Who Controls this Lost Section of the Fourteenth Amendment. 6 Charlson L. Rev. 775 (2012).

J.W. Verret. Separation of Bank and State: Consolidating Bailed-Out Companies into the U.S. Debt Ceiling and Government Financial Statements. 2011 B.Y.U.L. Rev. 391 (2011).

News and Blogs

Neil H. Buchanan. If the Debt Ceiling is Reached, the President Will Be Forced to Go It Alone, But the Fed Could Save the Day. Verdict (Justia blog) (Oct. 10, 2013)

Tensions Ratchet Up in Debt Battle. Wall Street Journal (Oct. 8, 2013)

Debt Ceiling: Understanding What is at Stake. CBS News (Oct. 8, 2013)

Nathaniel Popper. How a Debt Ceiling Crisis Could Do More Harm Than the Shutdown. N.Y. Times (Oct. 4, 2013)

Zachary Goldfarb. Long Debate over Debt Ceiling Could Harm Economy. Washington Post (Oct. 3, 2013)

Carl E. Lee & Peter Nicholas. White House’s Hard Line on Shutdown, Debt Ceiling Has Risks Attached. Wall Street Journal

Garrett Epps. If Congress Won’t Raise the Debt Ceiling, Obama Will Be Forced to Break the Law. The Atlantic

Think the Budget Impasse is bad? Wait Until the Debt-Ceiling Battle. Fox News

Kevin D. Williamson. The Real Debt Ceiling. National Review

Matt Bai. Obama vs. Boehner: Who Killed the Debt Deal? N.Y. Times (March 28, 2012)

Matt Taibbi. The Mad Science of the National Debt. Rolling Stone

The Debt-Ceiling Deal No Thanks to Anyone. Economist (Aug. 6, 2011)

The Debt Ceiling a Price Tag of Zero. Economist (Dec. 6, 2012)

Steve Bell, Shai Akabas and Brian Collins. Debt Limit Analysis. Bipartisan Policy Center (Sept. 10, 2013)

Matthew Yglesias. The Government Shutdown Versus the Debt Ceiling. Slate (additional coverage by Slate)

Greg Richards. Republican Strategy for the Debt Ceiling Crisis. American Thinker. (Sept. 25, 2013)

Zach Carter. Debt Ceiling Standoff Could Cause ‘Catastrophic’ Default. Huffington Post (Oct. 3, 2013)

Mark Gongloff. Wall Street Takes Sweet Time Freaking Out About Debt Ceiling. Huffington Post (Oct. 3, 2013)

Matthew O’Brien. Does the Government Shutdown Make a Debt Ceiling Crisis More Likely? Yahoo Finance/The Atlantic (Oct. 4, 2013)

Nin-Hai Tseng. 3 ways to Abolish the Debt Ceiling. Fortune/CNN (Sept. 30, 2013)

Jonathan Masters. U.S. Debt Ceiling: Costs and Consequences. CFR (Oct. 4, 2013)

Note: Law Library Research Fellow Yao Liu compiled most of the citations.