For crying out loud, Mr. President-Elect. During your first time at the plate you didn’t accomplish the salutary outcome of delivering the most conservative Supreme Court of modern times solely so that it could write Dobbs and thereby return the regulation of abortion (or not) to the states where it properly belongs. You actually now have a court that will do a lot more good—and in the present instance that includes permitting you to take rational and urgent action to require the Federal government to live within its means.
We are referring, of course, to the presidential authority to allocate Federal revenues on a priority basis if the latter falls short of scheduled expenditures and there is no available headroom under the public debt ceiling for the US Treasury to borrow in order to cover the shortfall. And with the impending expiration of the current debt ceiling suspension on January 1st that’s exactly what you will need to do from the very first hour you return to the Oval Office.
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So, please, do not under any circumstances capitulate to the Swamp Creatures and embrace a debt ceiling increase, thereby requiring your GOP congressional rank-and-file to walk the plank to vote for more open-ended borrowing on top of the $36.5 trillion public debt that will be in place by year end. The GOP has done the Swamp’s dirty work too long, and, besides, you were elected to drain it, not nourish it with more IOUs.
Needless to say, the minute you move to allocate the incoming revenues to debt service payments and say social security benefits, Veterans support and critical national security operations while cutting back or deferring everything else, you will get the Congress’ attention with respect to the urgent matter of entitlement reform, spending cuts and fraud, waste and inefficiency removal like no president has ever done in our lifetime.
Of course, the Swamp Creatures will first scream default, default, default! But that’s complete baloney and by taking decisive action to rationally allocate revenues in the absence of a debt ceiling increase you can make it abundantly clear that Washington has no choice except to finally bite the bullet on the nation’s runaway public debt. And for the reasons we outline below, we believe that the Roberts Court will not block any such effort to embrace fiscal sanity.
To start with, the current cash balance in the Treasury’s TGA account at the Fed is $800 billion, which would be enough to cover interest payments averaging $100 billion per month well past mid-year. So adroit use of the allocation power should eliminate any possibility of a short-term upset in the bond markets.
As a practical matter, the current $800 billion cash balance should be held in reserve and metered into current funding applications on a cautious basis in order to buy plenty of time for negotiations with Congress over the sweeping entitlement reforms and defense and nondefense appropriations cuts which are urgently needed. Thus, perhaps $100 billion per month could be released from the TGA account for current payments.
Based on the US Treasury’s most recent outlook for FY 2025 the underlying challenge would be to bridge the gap between projected monthly receipts of $465 billion and monthly outlays averaging $620 billion. But with the $100 billion drawdown from the cash balance, as a practical matter the equation to be balanced would amount to $565 billion of available cash per month or 91% of projected monthly outlays.
In that 9% shortfall condition, the President would have full powers, as we explain below, to prioritize the $620 billion per month of outlays. One sensible approach would be to pay 100% of certain high priority items, and than allocate the balance of available cash to a pro-rata cut of all other Federal accounts. As it turns out, that allocation factor for all except interest payments, Social Security, Veterans benefits and military pay would be about 84% as shown below in this example.
Illustrative Monthly Allocation Scheme In The Absence Of A Debt Ceiling Increase, FY 2025 Basis:
- Available Monthly Cash ($465 billion of Receipts Plus $100 Billion Drawdown): $565 billion.
- Outlays for 100% of Interest: $102 billion.
- Outlays for 100% of Social Security: $135 billion.
- Outlays for 100% of Veterans compensation and pensions: $15 billion.
- Outlays for 100% of Military Pay: $30 billion.
- Outlays for 84% of the $338 billion balance of all other Federal departments: $283 billion.
- Total Allocated Outlays $565 billion.
- Allocated Outlays As % of Current Total Baseline Spending: 91%.
To be sure, this is only one version of possible allocations in the absence of borrowing authority, but there is no reason why more detailed variations couldn’t be ordered, as well. For instance, the combined monthly budget for military O&M, procurement, RDT&E and construction/housing is about $52 billion. But there is no reason that all of these items would need to be pared back by the 16% factor used in the above example. Procurement and RDT&E could be more heavily deferrred by telling defense contractors to slow their work or wait for their reimbursements, thereby insuring nearly full funding of the $28 billion per month currently budgeted for more urgent readiness and O&M accounts.
The key point, however, is even with the $100 billion per month drawdown of the Treasury’s cash balance there would be a $55 billion per month shortfall in funding throughout the length and breadth of the Swamp outside of the four protected areas suggested above. That’s big time pain among the millions of payrollers, contractors, vendors and state and local governments who live off Uncle Sam’s borrowings. And it would persist month after month until Congress finally voted through a sweeping package of reforms and cuts that would cauterize the profuse bleeding at the Treasury.
There is actually no other choice. When you account for economic realism and eliminate the gimmicks and wishful thinking built into the current CBO and OMB budget baselines, the US is heading for a $70 trillion public debt by the mid 2030s and $150 trillion by mid-century. Needless to say, there is no way America’s already debt saturated economy— where combined public and private debt exceeds $100 trillion—could survive the massive interest rate crunch that would result from even attempting to fund public debts of these magnitudes.
Of course, the Swamp creatures will loudly declaim that the president can’t allocate in the manner described above, and in the absence of a debt ceiling increase he is required to just sit on his hands and weep as the US defaults on its interest obligations.
As it happened, however, Washington came close to this pass 13 years ago during the debt ceiling showdown of 2011 between the Obama Administrations and the GOP Congress. At
the time, professor Lawrence H. Tribe, who was and is the dean of liberal constitutional law mexperts, made it very clear that the president can indeed allocate available cash to the highest priorities as he and his advisors see it.
All of this brings me to my second point: what is the government to do if, come August 3, it does not have enough money to make all of the expenditures that Congress has required by law? The answer, I think, is that it must prioritize expenditures: some payments simply have to be postponed until the Treasury has enough money to make them.
To be sure, just as the Constitution authorizes Congress, not the President, “To lay and collect Taxes,” “To borrow money on the credit of the United States,” “To coin Money,” and “to dispose of … the Territory or other Property belonging to the United States,” as well as “to enforce, by appropriate legislation, the provisions” of the Fourteenth Amendment – including, of course, Section 4 – so too the Constitution authorizes Congress, not the President, to expend federal funds “to pay the Debts and provide for the common Defence and general Welfare of the United States.” That is, the Constitution allocates decisions about spending federal funds, just as it allocates decisions about raising such funds, to Congress rather than to the President.
In a situation where the legislatively authorized spending commitments outstrip legislatively authorized revenue, it is impossible to honor both of these allocational arrangements at once. One of them must give way. But which one? The answer may not be derivable from any explicit textual command, but history at least points in a clear direction: the principle that must yield is the one barring executive control over spending, not the one barring executive control over revenue-raising.
The principle against executive raising of revenue dates to at least the thirteenth century. In Magna Carta, King John promised, “No scutage nor aid shall be imposed on our kingdom, unless by common counsel of our kingdom.” The English Bill of Rights of 1689 condemned King James II for an “endeavour to subvert and extirpate the … the laws and liberties of this kingdom [by] levying money for and to the use of the Crown by pretence of prerogative,” and declared that “levying money … without grant of Parliament … is illegal.” And the battle cry of the American Revolution was, of course, “No taxation without representation!”
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In light of this unbroken history, it should come as no surprise that, as far as I am aware, no President of the United States has ever attempted to raise revenue without congressional authorization. By contrast, as Justice Scalia noted in his Clinton dissent, executive cancellation of congressional appropriations is far from unprecedented. For example, Ulysses Grant, Franklin D. Roosevelt, Harry Truman, and Richard Nixon all declined to spend money that Congress had appropriated.
Our legal system, moreover, has a long and deeply-rooted tradition of prioritizing personal liberty from government imposition over affirmative expectations of government payment, important though such expectations may often be and troublesome as that distinction may have become in an era of growing dependence upon governmental fiscal support. This tradition confirms what history suggests: the principle against legislatively unauthorized raising of revenue takes precedence over the principle against executive postponements or even outright cancellations of legislatively authorized expenditure.
It is hard to argue with professor Tribe’s reasoning in this instance, and even harder to believe that if President Trump where to exercise the powers of allocation in the manner Tribe describes that the Roberts Court would stand in the way.
In short, the very worst thing that Donald Trump could do as he enters his second go round in the Oval Office is succumb right out of the box to the long-standing Swampland Lie that there is no alternative accept to endlessly raise the public debt ceiling or default on the government’s $36 trillion of debt securities.
In fact, if Donald Trump really means to be the new sheriff in town he also needs to make clear that spending allocations are coming good and hard until Washington finally steps up to the plate and throws on the brakes of America’s Fiscal Doomsday Machine.
Reprinted with permission from David Stockman’s Contra Corner.
