Government Shutdown 2013 is Just the First Act, the Debt Ceiling is Next

Bam! September 30 at midnight, unless somebody blinks, most of the federal government will shut down and as many as 800,000 of the 2.1 million federal workers will be sent home — possibly without the promise of back pay — and the still-struggling U.S. economy will take another body blow. The reason has nothing to do with actual federal spending. Even House Republicans are willing to continue that at current levels. It is because, for perhaps the first time in U.S. history, one group of elected leaders , mostly Tea Party Republicans , is willing to set fire to the economy as a means of killing an already enacted and signed federal program.

And whether the Republicans realize it or not, the unintended consequence of their intransigence is that the president will regain an edge in the presidential-congressional budget conflict that has existed since 1974. (No space to write about it here, but this article notes the three phases of budget control: legislative dominance from 1789–1921, presidential dominance from 1921–1974, and legislative-executive conflict from 1974 to the present.)

The budget President Obama signed in 2009 was the latest one Congress enacted. Since that budget expired, we’ve paid for federal government programs through some 10 stop-gap continuing resolutions that allow government to go on spending at about the same rate while dealing not at all with deficits, tax issues, or programmatic changes.

The House did pass an 11th continuing resolution last Thursday that would fund all programs at current levels, but added a poison pill provision to defund the Affordable Care Act, more commonly called Obamacare. The Senate, with a strong bipartisan majority, rejected the provision defunding Obamacare, stripped it from the bill, and sent the “clean” version back to the House.

So, where we stand is that unless the House agrees to the clean Senate version of the bill, extending federal spending for a month or so but taking no other actions, on midnight Monday most federal programs, except those considered essential, will have to shut down. In fact, as CNN notes, the Antideficiency Act, first passed by Congress in 1884 during Chester Arthur's administration, prevents non-working federal employees from doing any job-related functions during a shutdown if the government cannot pay for it.

A government shutdown would be painful enough in good economic times, but with the U.S. economy struggling at a bare 2.5% annual growth rate, even the modestly depressed spending from a government shutdown would be harmful and perhaps disastrous. If a shutdown runs for three or four weeks it could cause significant economic damage, reducing the U.S. Gross Domestic Product by 1.4 percentage points for the quarter, according to Moody’s Analytics economist Mark Zandi

The biggest problem with just passing a continuing resolution, as a New York Times opinion piece notes, is that even if the clean Senate version is agreed to it will “preserve the deeply damaging spending cuts, known as the sequester, that are costing jobs and hurting the lives of millions.” Because we don’t have a lot of history with such shutdowns — the last one was under President Clinton, lasting for 28 days from mid-December 1995 — we can only speculate as to the true effects this one will have.

My guess? The House will eventually agree to the Senate’s clean version of the continuing resolution and avert a long shutdown. Why? Because with neither the Senate nor the president willing to compromise on Obamacare, refusal to pass a clean resolution would leave the House holding government programs hostage for nothing.

A second, bigger “because” is that the far more dangerous debt ceiling debate over whether or not the government can continue to pay its bills is looming only a couple of weeks from now, sometime around October 17. I spent some time on the topic of the debt ceiling last year. I won’t repeat that except to note that we are approaching the limit of $16.7 trillion set last year on how much debt the federal government can maintain. Since government sending continues to outpace its income, we will need to borrow to pay some of our debts. Unless the debt ceiling is raised, once we hit it we will no longer be able to borrow and will likely default on some of that debt. The resulting catastrophe of frozen credit, climbing interest rates, and a stalling economy could bring a replay of the Great Recession of 2007-2009.

Conservative icon Ronald Reagan once warned that “the full consequences of a default — or even the serious prospect of default — by the United States are impossible to predict and awesome to contemplate. Denigration of the full faith and credit of the United States would have substantial effects on the domestic financial markets and the value of the dollar.”

I can’t imagine that even the hardest core in either party wants that. But the threat of it could give the Republicans (or maybe just its Tea Party faction) an opportunity for hostage-taking far more ominous than in the budget resolution battle. We went to the brink on the debt ceiling last year and ended up passing an increase but at the cost of maintaining most of the sequester cuts in the process.

Does President Obama have to put up with this? Some say no. There is a range of opinion on whether or not the Section 4 of the Fourteenth Amendment gives the president the power to bypass Congress and raise the debt ceiling by executive order. House Minority Leader Nancy Pelosi (D-Calif.) said earlier this year: “Well, you ask the Republicans …we always passed the debt ceiling. When President Bush was president, as he was incurring these massive debts, and the Republicans weren't saying ‘boo’ at the time.… In fact, if I were president, I'd use the Fourteenth Amendment, which says that the debt of the United States will always be paid.”

President Obama has been reluctant to invoke such a 9-on-the-Richter-Scale option, opining that the Fourteenth Amendment does not give the president the power to raise the debt ceiling unilaterally, according to White House spokesperson Jay Carney.


But in a July 2011 New York Times op-ed piece, law professors Eric A. Posner and Adrian Vermeule argue that even without the Fourteenth Amendment the president would have the power to override the debt ceiling based on “the necessities of state, and on the president’s role as the ultimate guardian of the constitutional order, charged with taking care that the laws be faithfully executed.”

But like the threat of U.S. military force against Syria’s chemical weapons, just the real threat of an executive order raising the debt ceiling without congressional approval could force action.

We may soon find out who is right.