I have a slightly different view than most of our politicians and talking media heads about this budget and debt environment.
Passing a debt "ceiling" which is just is a blank check, and a budget which provides for unlimited spending is not going to really end the government created financial crisis.
The budget and debt battle has been ongoing for years. More laws aren’t needed as already there are many federal statutes which are focused on spending and appropriations.
For example, federal administration officials are already statutorily prohibited from authorizing or spending in excess of a Congressional appropriation or a fund.
To enforce this prohibition, the Antideficiency Act provides for both civil and criminal penalties. Removal from office is specifically mentioned.
In the current debate over the budget, debt and taxes, both the current Congress and the president act as if the Antideficiency Act doesn't exist.
All of us mere citizens have to follow the law, but those in Washington, D.C., are above all that.
Long before the current president, or, for that matter, the recent past group of presidents, unilaterally started to act like kings who have little patience for parliament or the peasants, the Congress was having trouble with the Executive Branch.
Yes, the Executive Branch has a long-term history of addiction to spending more than Congress allows. It didn't just start with LBJ.
But one Congress in 1870 was especially peeved and with the Executive Branch intrusions on its Constitutional Powers. Particular, the "power of the purse" was granted solely to Congress in the Constitution.
Congress used to jealousy guard its Constitutional prerogatives, but that was in a different time and a different place.
That Congress finally got the gumption to rein in the president and the executive agencies. They passed a law that was a simple statement of prohibition.
It shall not be lawful for any department of the government to expend in any one fiscal year any sum in excess of appropriations made by Congress for that fiscal year, or to involve the government for the future payment of money in excess of such appropriations.
Over the years, the Antideficiency Act of 1870 was amended. An amendment to the Act in 1990 is important in understanding the consequences of limiting or stopping appropriations. It clarifies that when there is an emergency, the Act provides an exception where the safety of human life or protection of property is involved.
This doesn’t include ongoing, regular functions of government that aren’t an imminent threat to the safety or human life or the protection of property. So, the fire department is in, the tax department is out.
The GAO has observed that the underlying principles of the Antideficiency Act are still simple.
"Government officials may not make payments or commit the United States to make payments at some future time for goods and services unless there is enough money in the ‘bank’ to cover the cost in full.” The ‘bank’ of course, is the available appropriation.”
However, the president and all other administration officials are still bound by the Antideficiency Act. Violations can result in fines or removal from office as well as be subject to two years in jail. I don't think that the president can be removed by the statute, but being held to violating the statue could very well be an impeachable offense.
Government shutdowns have happened before and there are procedures in place in the event of a lapse in appropriations. It seems that the politicians are scared stiff because their spending has become so vast and debt so great that restricting any spending, taxing, or borrowing will cause significant hardships.
Rather than accept the fact that this spending, taxing and borrowing cannot continue, Congress and the president are going through their traditional holy smoke and mirrors dance. “The markets will crash, the deadline will be breached, life as we know it on the earth will be no more.”
We have in Congress and the administration dealers but not leaders. Did you vote for your choice of president, House Member, or Senator to go to Washington to act like they are Donald Trump?
If so, then it would be a better, and less expensive, idea to just hire Trump and let him come to Washington and do what he does.
What's up with the compromise and bipartisan stuff?
Forget it. Either they can balance the budget or they can't.
Cutting $3 trillion over 10 years from additional borrowing of more than $10 trillion is a charade. Or as one of my retired partners would say — "a scheme and a fraud."
As I write this, I wonder if the stalwarts in the House can stay the course and balance spending with existing revenues. It isn’t a matter of different political policies; it's a matter of recognizing that political policy in Washington, D.C., is divorced from realty.
Cash flow, however, is realty and doesn't know from political policy.
A compromise in Congress increasing the federal debt may make sense to the politicians, but it won't stave off insolvency.
To do that, the government would need positive cash flow — a concept that doesn’t square with unsustainable entitlements, Treasury-draining long-term wars, and paying the Federal Reserve to print our money.
The Antideficiency Act was, to date, Congress' best attempt to limit spending beyond appropriations. If the political will to follow rational financial and legal principles law is effectively non-existent in Washington, then it's time for an enforceable balanced budget amendment. A great dream but unlikely to happen.
What should individual investors do in the meantime under the current political and federal budget and debt, circumstances? It would seem prudent to buy some farm land, physical gold, limit exposure to the risk of the U.S. dollar and the euro, and acquire a basket of safer currencies. Even the shekel is less risky than the dollar today.
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