The recent agreement to raise tax rates on the upper end of
the earning population postponed the fiscal cliff while avoiding any agreement
on spending cuts. Obama won on the key
plank in his reelection platform, which was to raise taxes on higher income earners,
and the House Republicans lost on their main plank, which is to cut
spending. Since President Obama won the
election, it is fitting that he wins the tax rate debate. But the House Republicans won reelection as
well, and they have yet to win the spending debate.
Now we come to the debt ceiling decision. In approximately one to two months, the
government will out be of the ability to borrow funds above their current level
since it has hit its ceiling in late December.
Obama wants the Congress to raise the ceiling without cutting spending. The House Republicans want to cut one dollar
in spending for every one-dollar increase in the debt ceiling. Obama objects saying that the debt ceiling
should be raised automatically to accommodate the spending that the House
Republicans have already approved. Not a
bad argument, or is it?
To analyze the Obama argument requires some background on
budgeting. A budget is a document that
sets forth the ‘sources and uses of funds’ for a specific period of time for an
organization. ‘Uses’ refer to the
typical image that most people think of when they refer to a budget, which is a
list of planned expenditures. The
billions for defense and health care are listed under uses of funds. ‘Sources’ refer to the where the planned
expenditure dollars will come from, namely taxes, fees, and debt.
The problem with Obama’s argument is that there is no budget
of the United States. There has not been
a budget for the Federal Government for three years, one year prior to the
House Republicans taking control to cut spending. In a previous year, the Obama proposed budget
was presented to the Senate and was defeated by Obama’s own Democrats. For the last three years, our Government has
been operating mostly under Continuing Resolutions.
A Continuing
Resolution refers only to ‘uses’ side of the budget. It does not refer to the ‘sources’ side. It has nothing to do with debt. Further, it is a default position for the
Congress. If the Republicans and
Democrats cannot agree on budget, they issue Continuing Resolutions that
reflect agreements from the first year of the Obama administration, or, in
other words, an all-Democratic view of the budget. Ever since, the Republicans in the House have
sent budgets with spending cuts to the Democratic Senate and they get back
Continuing Resolutions. The Republicans
have not been able to make progress on their main reason for being elected,
which is to cut spending.
Now we come back to Obama’s argument to pay for a series of
Continuing Resolutions that avoided negotiating with Republicans with an
argument that the Congress should pay for its debts. The real meaning is that the Congress should
continue avoiding negotiating a budget agreement with the Republicans. This is not consistent with the spirit of the
Constitution, namely that the two houses and the administration actually
negotiate a budget.
In all fairness, the Government has operated under
Continuing Resolutions in both Democratic and Republican administrations. However, in the most recent election the
electorate chose a Democratic President and Senate, and a Republican
House. There are many polls that show
the electorate wanting both parties to work together despite this split in
institutional control.
The Obama argument, if successful, would require the House
to abandon its constitutional responsibility to opine on the sources of dollars
needed to fund our Government. If there
were a budget, then the House would have had its say.
A negotiated budget representing the compromises that the
electorate wanted when it elected a Democratic President and a Republican House
is what the country needs. If there were
a budget, there would be no objection to a debt ceiling increase consistent
with that budget.
