The budget of the USA runs from October 1 through September 30 of each year. The current budget for 2013 ended on September 30, 2013.
In the annual budgetary process when a budget is agreed upon by the Congress for the October 1st through September 30th fiscal year, Congress passes legislation that sets an amount of money to fund the government for the ensuing year. However not all the money in the budget is allocated to specific agencies and departments. Congress subsequently authorizes those allocations through what is called “appropriations” whereby it sets the specific amounts allocated to each department or agency to fund their operations.
Only Congress may appropriate money for the operation of the federal government. Translation: Congress must pass separate spending bills (after the that appropriations process has been negotiated by the House and Senate) to fund the operation of government. And what if specific appropriations do not becomes law? Then there is no budget set for certain government agencies and departments and that can trigger many government functions to cease immediately. This is exactly what has has happened to our nation.
In order to prevent the interruption of government services- to avoid a shutdown like we are experiencing- Congress and the President could have passed, as is routinely done, what is known is a continuing resolution (“CR”). A CR authorizes the government to fund agencies at the levels at which they are currently operating until the earlier of (i) the CR’s expiration, or (ii) an appropriations bill being passed by Congress and signed into law by the President.
The Republican Congress has refused to pass a CR that does not defund- that is, strip funding for- Obamacare. The President and the Democratic Senate have refused to sign into law other than a “clean CR” with no conditions attached. The President has taken the position that the time to debate funding for Obamacare is during the 2014 budgetary process. The Republicans contend that the President’s refusal to negotiate the CR is the cause of the shutdown; the President and the Democrats blame the Republican Congressional caucus for trying to do an end-run around the budgetary process by way of attaching an unacceptable condition to the CR. The Republicans claim “we are open for negotiation”- knowing well good that the President and the Democrats in the Senate will not defund Obamacare.
What may seem like a Chinese standoff- and regardless of whom you may blame- the reality is that both sides will negotiate. Veterans being turned away from the Vietnam Memorial, federal employees not being paid for averting a driver assaulting the White House and the Congress, children being turned away for treatment at the National Institute of Health, a powerful storm in the Gulf posing a threat to Gulf states at a time when FEMA had been cut back-we’ve already witnessed legislation introduced in the Republican House to fund certain governmental agencies that the public supports. Many politicians and Americans don’t like “big government”, until they need it.
Raising the Debate Ceiling and not passing a CR may collide soon. By mid-October the US Treasury will exceed its statutory capacity to borrow the funds necessary to pay creditors of the United States. There is little disagreement on either side of the aisle that a government default must be avoided- although nothing would surprise me at this point. The collision I refer to goes like this. So long as there is no CR, the closer our nation comes to the time when lawmakers will have to resolve both the continuation of the partial shutdown and the necessity of raising the Debt Ceiling.
It is a common misconception that raising the Debt Ceiling raises the Budget Deficit. The two have absolutely nothing to do with each other. In seeking the raise the Debt Ceiling, The Treasury is simply seeking authority to pay obligations which Congress has already incurred- obligations that are reflected in a budget deficit or surplus. Again: raising the Debt Ceiling does not increase the Budget Deficit.
Think of raising the Debt Ceiling as an exercise in figuring out how to pay for bills you have already incurred. Let’s say you lose your job but have good credit or ample savings. In figuring out how to, say, pay your mortgage you would have two choices: borrow or dip into your saving to pay your monthly mortgage payment, or default on the payment. Regardless of what you may choose to do, neither will change your income and contractual expenses for the year, be they a surplus or a deficit. If you choose to borrow or dip into your savings, then you have made a decision to raise your personal Debt Ceiling. You will not owe more money that you did before: you extinguish debt owed on your mortgage and increase borrowing from another source. The net effect is neutral in terms of your personal surplus or deficit for they year.
Back to Washington. If the Debt Ceiling and the CR become bargaining chips in return for defunding Obamacare or cutting government expenses, is that political malpractice? Some believe so, given that the Congress and the President can strike a deal to pass a clean CR, raise the Debt Ceiling and then engage in budgetary battles over taxes, expenditures and funding Obamacare during the budgetary process. With the GOP controlling the House and the Democrats controlling the Senate and the White House, both parties have “no go” leverage, and every incentive to negotiate assuming they desire to move the peoples’ business forward.
In today’s dysfunctional democracy that might just make too much sense.
Lastly let me remind you: politicians work for you. They are our employees. They are not rock stars. If you are unhappy with their performance, then exercise the one right you have that no amount of money can deny you: your Vote. As a nation we have only ourselves to blame for failing to exercise our voting rights every two years to hire and fire the lawmakers we send to Washington.