Friday’s march from the University of Louisville to the downtown financial district was smallish. The crowd chanted to the beat of a plastic bucket used as a drum, “We are the other ninety-nine percent.” That’s Occupy Louisville on day 4 of its existence. As you can see from the photo, there were about 50 marchers, with bicycle outriders. Every last one of them looked to be a university student. The weather has been exceptionally dry and nice this week, but I wonder how long they can keep it up heading into Halloween, and the first frost of the season.

SEC. 114. (a) Except as provided in subsection (b), each amount
incorporated by reference in this Act that was previously designated
as being for contingency operations directly related to the global
war on terrorism pursuant to section 3(c)(2) of H. Res. 5 (112th
Congress) and as an emergency requirement pursuant to section
403(a) of S. Con. Res. 13 (111th Congress), the concurrent resolution
on the budget for fiscal year 2010, is designated by the Congress
for Overseas Contingency Operations/Global War on Terrorism
pursuant to section 251(b)(2)(A) of the Balanced Budget and Emergency
Deficit Control Act of 1985, except that such amount shall
be available only if the President subsequently so designates such
amount and transmits such designation to the Congress. Section
101(b) of this Act shall not apply to any amount so designated.

The money being discussed in this section is about $158 billion that cuts a wide swath through many parts of the U.S. Defense Department budget. This $158 billion is in addition to the discretionary spending caps Congressional Republicans insisted upon this summer, in the  Budget Control Act of 2011. This $158 billion is divided up into some fifty different account categories from personnel ($16.2b), operations and maintenance ($95.8 b), procurement ($26.1 b) , the Afghanistan Security Forces Fund ($11.6 b) and the Pakistan Counterinsurgency Fund ($800 m).

If President Obama “subsequently so designates such amount” the money is there, but only if he so designates. It is the President’s option.

Louisville Metro Police were nearby, in the shade. One cop for every seven protesters.

As I write this on October 2, 2011, the second full day of the Federal government’s 2012 fiscal year, the headlines read, “Republican budget hawks cut 2012 defense spending by $100 billion.”

You will never actually read that headline because nobody in or out of government believes it will end up that way, even if it is the way it temporarily stands today. Personally, I have no reason to believe it either.

Nevertheless, while dancing their “cut, cap and balance” dance, the Republicans insisted that fiscal year 2012 Security Category spending not exceed $684 billion, and for some strange reason they also arranged it that about $130 billion in funding for the Global War on Terror was not included in that amount. The plan is to have a special emergency appropriation for such overseas operations that would automatically boost the spending cap.

The problem is that the $684 billion Security Category spending cap is law, and the special emergency military appropriation has not happened. There has even been some talk that President Barack Obama and the  Democratic members of Congress might use the situation as leverage in negotiating Obama’s jobs bill and revenue increases.

I’m just saying that the Republicans bragged openly about the tough bargain they won in the debt ceiling deal, and in this context it would by very difficult to blame massive defense cuts on the Democrats. The Republican’s got what they wanted, and nobody force them to lie about it.

In July, 2011, the Republican House passed a $649 billion defense spending bill for FY 2012 , but the August Budget Control Act of 2011 put a spending cap of $684 billion on Defense, Homeland Security, Veteran Affairs, Foreign Assistance and Nuclear Security combined. For Defense to be funded at $649 billion in FY 2012, Homeland Security, Veteran Affairs, Foreign Assistance and Nuclear Security must each be cut by 80% from their FY 2011 funding levels.

This is not going to happen. It was never going to happen. Those who negotiated the Budget Control Act of 2011 and who insisted upon spending limits knew all along that the spending caps for 2012 were phony.  It was a queer bill from its inception, and the Republicans put the country through nine types of hell over the debt ceiling for nothing. Absolutely nothing, except a stupid charade that wouldn’t fool a third grader.

What’s the charade, you ask?

They forgot to include the costs of Afghanistan and Iraq in the spending limits. Republican leadership, so-called, was planning on slipping another $150 billion into the pot by an emergency off-budget war appropriation that nobody would notice.

It is such a lame charade simply because it is impossible to hide a $150 billion Congressional appropriation by pretending it didn’t happen.

Certainly Congressional Democrats will have no qualms about bumping up the spending limit on the Security Category by another $150 billion, but be sure the firebrand deficit hawks on the right will. Republican leadership doesn’t have the guts for significant spending reductions in the Security Category. This gives Congressional Democrats considerable leverage, if they can hold out and not pass any defense spending bills prematurely.

There are many Federal Executive Departments and Agencies spending time, money and effort in or on behalf of operations in Iraq, Afghanistan and elsewhere. In addition to the Department of Defense, there is significant participation by the State Department, the Department of Agriculture, The Department of Transportation, the Justice Department, the International Trade Commission, the Export-Import Bank of the United States, and the Agency for International Development, to name a few that have public names.

Normalizing the Iraq and Afghanistan costs as part of the budget management process reflects a level of common sense. The operations have stabilized and are suitable for budget management.  But, Congress ignores that.  Also ignored is the fact there have been no supplemental spending Bills for the “Global War on Terror” for several years. Yet, there is an atavistic tendency in both the  House and the Senate to re-animate that decrepit process and that insists upon doing things the old way. For example, the Department of Defense Appropriations Act, 2012, H.R 2219 passed the House (336-87) on July 8, and was referred to the Senate. According to the press release, “the bill contains $530 billion in non-emergency funding . . . [and] . . .  $119 billion in emergency spending for Defense activities related to the Global War on Terror.” [Total $649 billion]

An important point is that the phrase, “Provided, That each amount in this paragraph is designated as being for the global war on terrorism pursuant to . . . . “, appears in the Bill thirty-two times. The significance of this language is that it raises the Security Category spending cap for FY 2012, as set in the Budget Control Act of 2011 (The Act) by the same amount appropriated for the identified account. And, it does it unobtrusively.

The quirkiness of the game introduces a new step into the legislative approval process which effectively grants President Obama a quasi line-item veto to fine tune the Security Category spending cap for FY 2012 to be almost any way Obama wants it.  The Act provides, in part, “[If] . . . .  the Congress designates for Overseas Contingency Operations/Global War on Terrorism in statute on an account by account basis and the President subsequently so designates, the adjustment shall be the total of such appropriations in discretionary accounts . . . .”

The 32 instances of the phrase, “being for the global war on terrorism,” followed by a dollar amount and an account name in H.R 2219, have given President Obama 32 different dollar amounts that he can either designate or not designate being for the global war on terror. If this House Bill passes the Senate, President Obama can sign the Bill into law like any other piece of legislation, but it is a separate official act for him to accept or reject the designation required by The Act. Every designation that Obama accepts raise the spending cap in the Security Category, and every rejected designation does not, even if it does increase the appropriation.  The effect of the latter would be to force cuts in other parts of the Security Category, either voluntarily or by sequestration.

The Sting

Seeking a cultural metaphor to encapsulate the debt ceiling standoff of July and August, one need look no farther than the 1973 Paul Newman – Robert Redford classic film, The Sting. In that movie, a vagabond group of petty criminals band together to right a wrong, and to steal from the rich and murderous crime boss for the benefit of the poor. The Sting is a Robin Hood story executed by means of finesse and intelligence, rather than with swords and force,  with an impressive display of of legerdemain and over-the-top showmanship. Nobody actually gets killed or injured as justice is dispensed.

The audience understands at the movie’s end how badly crime boss Doyle Lonnegan (Robert Shaw) was out-foxed, but Lonnegan himself is merely confused. suspicious, and hustled. It will take him some time to understand that the Redford and Newman characters picked his pocket of half a million dollars, and got away with it.

Obama arrives in Chicago August 3, 2011

Budget Control Act of 2011
(P.L. 112-25, S. 365, 125 Stat. 239, enacted August 2, 2011)
Full text from the Government Printing Office

This is the name given to the deal enacted on August 2, 2011 that raised the Federal debt limit and staved off the Republican threat of self-inflicted sovereign default. It is a difficult bill to read and understand, and it contains several parts in addition to raising the debt limit. Two Hundred two Congressional Republicans, seventy percent of them, voted for this bill. It might be fair to say that not one of them understood in full detail what the Budget Control Act of 2011 (“The Act”) actually provided. If the Republicans  had understood it, they would never have voted for it.

Cut, cap and no balance

A salient feature of The Act is the limit it places on Federal discretionary spending for fiscal years 2012 through 2021. The Federal budget concept of “discretionary spending” is adjusted by The Act by specifically including the following items in the working totals.

1. Overseas contingency operations and global war on terrorism;
2. Continuing disability reviews under Social Security;
3. Health care fraud abuse control program (account 75–8393–0–7–12 571), and;
4. Disaster funding.

Some of these are nominally mandatory spending items and have caps of their own imposed by The Act.

For fiscal years 2012 and 2013, The Act expresses its basic adjusted discretionary spending limits in two categories:  Security and non-security. The spending limits for all subsequent years (2014 – 2021) are aggregate sums.

The term ‘security category’ includes discretionary appropriations associated with agency
budgets for:

1. The Department of Defense;
2. The Department of Homeland Security;
3. The Department of Veterans Affairs;
4. The National Nuclear Security Administration;
5. The intelligence community management account (95–0401–0–1–054), and;
6. All budget accounts in budget function 150 (international affairs).

The ‘non-security category’ is everything else.

For fiscal year 2012, The Act caps security spending at $684 billion, and non-security at $359 billion. For fiscal year 2013 these numbers are, respectively, $686 billion and $361 billion. At first glance, one might think that these spending caps are weighted in favor of defense spending, and against domestic spending. That’s what I thought at first, but digging into the budget numbers tells a different story. The ‘security category’ is cut by a percentage amount greater than  2 to 1 compared to the ‘non-security category” .

Hard numbers

Using numbers provided by the Office of Management and Budget, Public Budget Database – Budget Authority, it is possible to add up the amounts that comprise the ‘security category,’ as defined by The Act.

FY 2006 – $629 billion
FY 2007 – $727 billion
FY 2008 – $812 billion
FY 2009 – $824 billion
FY 2010 – $857 billion
FY 2011 – $879 billion
FY 2012 – $684 billion
FY 2013 – $686 billion

By capping the FY 2012 ‘security category’ spending at $684 billion, Congress has agreed to roll that collection of budget items back to pre-2007 levels, in aggregate.  It is a 22.2% decrease from the $879 billion FY 2011 funding levels. This compares to The Act’s 10.4% reduction in the ‘non-security category,’ from $400 billion to $359 billion.

The trick

The discretionary spending limits The Act imposes are automatic, by a process called sequestration. This mechanism was perfected by the Balanced Budget and Emergency Deficit Control Act of 1985, also known as the Gramm–Rudman–Hollings Balanced Budget Act.  Since the mechanism of sequestration  makes flat percentage cuts across all non-exempt budget categories, regardless of priorities, it seems extreme.  Congress so far has been unwilling  to ever let it happen. When faced with the possibility of sequestration in the past, Congress has always repealed the budget caps.

Fiscal year 2011 ends September 30, but the Congressional appropriation process is far from complete. A Joint Resolution that continues government functions  beyond October 1 at the 2011 levels has been discussed, but the sequestration process will ultimately kick in to arbitrarily remove nearly $200 billion from the ‘security category.’ It could be an administrative and political nightmare. The best solution would be for Congress to devise an omnibus budget bill that incorporates the required spending limits.

The next trick

The Act also requires a Congressional ‘super-committee’ to devise a bill that eliminates at least an additional $1.2 trillion  of the budget deficit by FY 2021. If this deficit reduction bill is not enacted into law by January 15, 2012, The Act imposes a different set of discretionary spending caps for FY 2013 through 2021 for the ‘security’ and the ‘non-security’ category, but it also redefines the meaning of the categories. The net effect of the change is to focus spending cuts on he Defense Department, if Congress fails in its mission.

Smoke and mirrors

The Budget Control Act of 2011 is a nightmare to read, and if you believe any part of the Republican claims they “got what they wanted, ” or media claims that Obama capitulated, it makes it that much more difficult. What Republican wants to cut defense spending by 22%, but to cut domestic spending by only 10%?

Did Obama eat the Republican’s lunch?

After noodling the numbers in shocked disbelief for several weeks, that’s how it looks to me. If anyone has a better understanding of this legislative horror, I want to know about it.

I have to set this aside now for a while to let my brain cool off, but I have to say it looks like President Obama took the Republicans to the cleaners during the debt limit negotiations, and then he kept his mouth shut about it.

Fourteen months before the Presidential election of 2012 is too far in advance of the decision point for the shape of the probability wave to be measured, or even observed. Events during the year immediately preceding an election generally have more influence on the outcome of an election than do those of any prior year, just due to the electorate’s  shortness of memory. Presently, the most relevant time period is called ‘next year.” The immediate situation leading up to an election has more impact than does a  distant historical past. At this point in time, all trance induced vision of the future are marketed for entertainment purposes only. The main constant is that things change, especially now.

It is impossible to read about politics and current events without encountering a steady stream of political predictions regarding the question, “Who will be President of the United States in January, 2013?” The whole process is hopelessly impossible given that things change fairly rapidly these days.  Fourteen months is a long time in dog years, and it is impossible to predict. Yet, the essential human urge to speculate, to place bets and to make odds about future events is not repressed in the least by that fact. The careers of many are built upon it.

One of the simplest methods of predicting the outcome of the 2012 Presidential election is the unemployment rate. On May 25, 2008 the national unemployment rate was 5%. That day the Washington Post analyzed the unemployment rate on election day for every Presidential election since 1960, Unemployment and presidential elections, and confidently predicted, “If the rate continues to rise between now and November, Republican John McCain will likely have difficulty retaining the White House for his party.” Little did this Washington Post writer know of the major economic bumps that lay ahead in the summer and fall of 2008. The national economy was in such bad shape by November, 2008, the Onion announced Barack Obama’s victory with the headline, Black Man Given Nation’s Worst Job.

This is a perfect example how radically circumstances can change in a few short months. For those with the memory capacity to do so, imagine the difference between May, 2008 and election day on November 4, 2008.  True enough the National employment rate slacked off a bit and the general prediction held.

Another useful measure of an incumbent’s chance for re-election is Ronald Reagan’s famous question, “Are you better off now than you were four years ago?” The suggestion was if you were worse off in 1980 compared to 1976, then blame it on President Carter and vote for Reagan. It was less a predictor than it was a rhetorical reminder that the Federal government plays a large role in the health of the economy. Most people can’t actually remember how well  off, or not,  they were four years ago.

The most popular method of enjoying the illusion of a political horse race between election years is the opinion poll. There are hypothetical head-to-head contests, approval ratings, job performance and likability indices.  The substantial amount of money in partisanship politics and advanced technology has made opinion polling a growth business. At any point in time it is cheap and easy for an average person to know what a statistically significant sampling of the Nation thinks on any given topic, and to track the changes over time. Still, the next best opinion poll sample is the one taken closest before he election itself. Fourteen months in advance popularity polling is fairly useless.

But, it provides employment and something to talk about.

Good short term predictors are the future event markets, like Intrade.com.

The hard cash speculators saw Rick Perry coming several weeks before most others did.

The significant detail is that in 2009 and 2010, U. S. Defense spending was at a level that consumed more than 77 cents of every dollar received through personal income tax payments. Looked at in a different light, it means that U. S. Defense spending was borrowed money added to the Federal debt at a rate of 77¢ for every $1 of personal income tax collected.

Make of it what you wish.

The Budget Control Act of 2011 will last that long because it is the approximate amount of time necessary for shell shock to abate and the realization of what just happened to sink in. The process begins with the understanding that the Republicans aim to reduce fiscal year 2012 non-defense discretionary spending by a full one-forth from the FY 2011 levels, while increasing defense spending. [ Note: I wrote this before I really understood what Congress had done.]

Deal or no-deal? An agreement extorted by threat of unimaginable harm is not an agreement at all, and it’s not going to happen. No deal.

The major impediment to this lurch to economically destructive austerity is the necessity of Congress to actually pass budget appropriations implementing the proposed budget cuts, and there is no way that occurs. All that’s required to stop it is for Senate Democrats to dig in their heels.

So, what’s next?

The fight continues, except the Republicans’ ability to play the nuclear option of debt limit default has been removed. They shot their wad already. The Republicans will be back to stomping their feet and pouting. I predict that it will take at least one government shutdown before the end of the year, and possibly a second shutdown in the spring of 2012. It will be Déjà vu – government shutdown fifteen years later.

But what precisely will [President Obama] fight for now that the debt deal has tied his hands?

He says he wants to extend tax cuts for middle class families and make sure the jobless get unemployment benefits.

Fine, but the new deal won’t let him. He’ll have to go back to Congress after the recess (five weeks from now) and round up enough votes to override the budget caps that now restrict spending. What are the odds? Maybe a little higher than zero.

As an honorable man, Reich’s natural way of thinking is that a deal is a deal, but by my way of thinking any deal that was agreed to under duress is no deal at all, and it should be reneged upon at the  first opportunity. The recently enacted Budget Control Act of 2011 is misnamed. The only substantive part of the Bill is the part relating to the debt ceiling. The remainder of the Act is a collection of unenforceable suggestions, a Republican wish list, that can and ought to be short-circuited any way possible. The Act should have been named the Debt Ceiling Act of 2011.

The meaningful parts of the Federal budget process are the actual appropriations, mostly contained in the annual budget Bill.  The way I understand it, the Congressional appropriations for fiscal year 2011 terminate at midnight on September 30, 2011. The so-called  Budget Control Act of 2011 does not contain any appropriations.  Congress still needs to enact a fiscal year 2012 budget for the government to continue normal operations starting on October 1.

If the actual FY 2012 Federal budget appropriations bill, as enacted and signed into law, exceed the caps contained within the recent debt ceiling legislation, then so be it. Any law enacted by Congress can be amended or repealed by a subsequent law, and it is nearly impossible to prevent this. It has been tried before. The Balanced Budget and Emergency Deficit Control Act of 1985 (The Gramm-Rudman-Hollings Act) imposed deficit caps for fiscal years 1986 through 1991 which were totally ignored by the actual budgets for those years.  The Gramm-Rudman-Hollings Act attempted to require a zero Federal budget deficit for FY 1991, and we know that it did not happen that way.

Except for the provisions relating to raising the debt ceiling, essentially the plan proposed by Sen. McConnell, the  Budget Control Act of 2011 is political theater.  Warfare in Washington over budget matters will resume shortly, but no later than October 1, 2011 when the government shuts down if Congress does not appropriate anew. Congress can totally ignore the budget caps contained in the  Budget Control Act of 2011, if it wishes.

Nobody’s hands have been tied, Mr. Reich.

The United States government holds 261,498,899.316 Troy ounces of fine gold in the form of bullion (fine gold) or coin (alloyed gold). The terminology can be confusing. The word ‘bullion gold’ does not mean gold bars or ingots, it means gold in its pure form. Likewise, ‘coin gold’ does not mean gold in the form of circular disks. Coin gold refers to a mixture of gold and other metals, usually silver or copper, that is harder and more durable than pure gold. Coin gold is the name of the alloy used to make gold coins intended for circulation, where it is passed from hand to hand and needs to withstand wear. Gold coins can also be made of pure gold and are called bullion coins.

The form of gold held by the U. S. Treasury is 258,641,851.485 Troy ounces of bullion gold and 2,857,047.831 Troy ounces of fine gold in coin gold alloy.

Although the majority of U. S. owned gold is held at the Mint operated Ft. Knox, Kentucky, depository (147,341,858.382 Troy ounces), there are also deep vault storage locations in Denver, Colorado, (43,853,707.279 Troy ounces) and West Point, New York, (54,067,331.379 Troy ounces). The U. S. Mint holds an additional 2,783,218.656 Troy ounces of fine gold in the form of coins, blanks and working stock at various other locations. The Federal Reserve holds 13,452,783.620 Troy ounces of gold in its New York City vault, with a small amount used for display.

At today’s market price of $1,666 per Troy once of fine gold, the United State’s gold reserve is worth $435,657,166,260.46.

December, 2010: President Obama goes along with a deal with Republicans to extend unemployment benefits in exchange for extending the Bush tax cuts to December 2012, after the election. Both moves were bad for balancing the budget, but both were good for the economy. Obama didn’t give anything up from a Keynesian point of view, even if it looked like he took a hit. The general Keynesian rule is to not raise taxes during a recession.

In April, 2011, when faced with the threat of government shutdown over budget disagreements, President Obama agreed to a $38 billion budget cut in exchange for a $1,365 billion spending agreement. That represents only a 2.7% spending cut, even if the cuts all fell in the last half of the fiscal year. It’s hard to imagine a 2.7% cut as giving away the store, yet Obama was pummeled for being an appeaser and caving in to Republican demands, but it was the Republicans who blinked. The radical right fumed and vowed to take the fight to the upcoming debt limit increase.

In August, 2011, when faced with a government default over raising the debt ceiling, the professional Republican politicians compromised, even as the freshman Tea Party members of Congress raged. President Obama took a verbal thrashing, mostly from his friends and allies on the left. Obama was described as weak or incompetent, but a monumental disaster was averted.

This sets the stage for the next big Congressional brawl at the end of  September when the 2011 Federal budget expires. President Obama has clearly established himself in the public eye as reasonable and accommodating by all accounts. Is that a character flaw as the left wing argues, or is it merely part of Obama’s long term strategy to encourage division on the right?

My theory . . . and it’s just a theory . . . is that President Obama will take a hard stand against the inevitably unreasonable Republican demands to cut the 2012 Federal budget this September. He will force the right to take ownership of a government shutdown like that of 1995 – 1996 during the Clinton administration, and the political results will be the same. Déjà vu – government shutdown fifteen years later. Only then will Obama relent, somewhat,  and save the day.

If fate will be so kind as to provide a viable right wing third party Presidential candidate next year, like Ross Perot in 1996, then history will do a near perfect repeat. Like President Clinton, Obama will win election to a second term as President.

I don’t know. I honestly can’t wrap my head around it. The political rhetoric makes me dizzy, and I don’t trust any economic predictions of the future. My fallback position is to ignore the talk and to focus on the deeds.

If balancing the budget was of urgent importance right now, I believe that the political critters in Washington would not be divided upon party or ideological lines. If the National debt was about to blow up and ruin our country, I believe that recognition of the impending disaster would cross party lines.

Crisis tends to unify people and galvanize the collective will to action. That isn’t happening.

A genuine recognition of impending disaster does not allow any possible remedy to be taken off the table categorically. A drowning man clutches at straws. This make me believe the blank refusal to increase tax revenue is an indicator the problem is not as urgent as advertised.

Having first hand experience with household budget problems, as much effort goes into finding ways to increase income as goes into cutting spending. If you use the household budget as an analogy for the Federal budget, please use the entire picture and not just the half that suits your ideology.

I don’t doubt that the Federal debt and deficits are problems, but I do have serious doubts that they are crisis problem. Crisis problems inspire unity and a willingness to consider any solution, including raising tax revenues.

That’s not happening, so forget the heated rhetoric and ideological posturing. It is a time that calls for practicality. Don’t panic.

If the Congress refuses to provide full funding for the existing Federal budget and forces President Obama to prioritize expenditures, suspension or termination of many Federal contracts would be a dire necessity. The circumstances would also give President Obama good justification for outright cancellation of any Federal contract that didn’t fit with his personal political or policy priorities.

One possibility that comes to mind might be contracts for the development of advanced weapon systems that are not high on the President’s list of priorities. If the President were a petty politician, he might unobtrusively target cancellation of contracts with businesses located in heavily Republican districts. Proceeding with the intention of harming your opponents seems to be standard operating procedure in Washington these days.

I’m not suggesting that the President would ever act with anything but good faith. Still, I have to question whether the GOP has considered it will be giving the President the unfettered opportunity to do so if no deal is reached soon.

The sticking point was the GOP demand that the President agree to their version of a balanced budget. In months of negotiations, the President had actually given a far amount of ground, infuriating Democrats on the left. He agreed to a balanced budget over seven years, to tax cuts, to changes in mandatory spending programs such as Medicare. But the two sides were remained far apart on the pace of spending cuts — and even further apart on the policies behind those cuts.” The Republicans made a mistake: “They appeared to be too eager for a confrontation, while the President constantly emphasized he was willing to compromise within reason.

In the end, after weeks of turmoil, the Republicans meekly gave up and eventually cut a deal with the President that was not much different than what they could have gotten before the shutdown. The President used the episode as the springboard for his successful reelection campaign.

This is slightly modified from Lessons from the great government shutdown of 1995-1996 by Glenn Kessler in the Washington Post. The President in that story is Bill Clinton and he was negotiating with Newt Gingrich, GOP Speaker of the House of Representatives. The situation then is almost exactly the same as it is now with with the debt ceiling standoff, but magnified. Now the National economy is much more tenuous and the damage done by a government shutdown or default will be more severe.

It’s obvious that President Obama has learned the lessons of 1995 – 1996, and he has modeled his strategy after President Clinton’s. Unlike the government shutdowns of the Clinton administration, with GOP leadership being the driving force behind the confrontation, now Speaker Boehner is being driven by a radical splinter group in his own party.  In the 1990s Newt Gingrich miscalculated and made a mistake. In 2011 the Tea Party and its GOP pawns are willing to bet the farm in a self-righteous grab for power. Never once, it seems, have the Tea Party activists asked themselves, “What if we are wrong?”

This is from the 106th Congress House of Representatives

IN THE HOUSE OF REPRESENTATIVES
JANUARY 6, 1999
Mr. ENGLISH of Pennsylvania (for himself and Mr. BALDACCI) introduced the following joint resolution; which was referred to the Committee on the Judiciary

JOINT RESOLUTION
Proposing an amendment to the Constitution of the United States to allow an item veto of appropriation bills.
Resolved by the Senate and House of Representatives of the United States of America in Congress assembled (two-thirds of each House concurring therein), That the following article is proposed as an amendment to the Constitution of the United States, which shall be valid to all intents and purposes as part of the Constitution when ratified by the legislatures of three-fourths of the several States within seven years after the date of its submission for ratification:
”Article —
”The President may disapprove any item of appropriation in any bill. If any bill is approved by the President, any item of appropriation contained therein which is not disapproved shall become law. The President shall return with his objections any item of appropriation disapproved to the House in which the bill containing such item originated. The Congress may, in the manner prescribed under section 7 of article I for bills disapproved by the President, reconsider any item disapproved under this article.”

Mr. CANADY. Under the proposed amendment, the President would have the power to veto any item of appropriation and any bill. The President then would be required to return the vetoed item to Congress along with his objections. As with any piece of legislation, Congress would still have the opportunity to override the President’s veto by a two-thirds vote of both Houses.

More here. And here.

• To raise revenue;
• to impose and collect taxes;
• to pay debts, and;
• to borrow money.

It couldn’t possibly be more clear.

Obama’s Constitutional duty as President is to manage and execute the laws enacted by Congress. In the event Congress behaves irresponsibly and refuses to provide the funds necessary to honor prior legislative expenditures and appropriations, then the President must do the best he can with what funds he has available. The President must prioritize government expenditures and pay the more essential functions or obligations before the less essential ones. Where have we heard this language before? Where does a discussion of essential and non-essential government functions crop up?

Essential and non-essential government functions is the language of government shutdown when Congress fails to authorize budget appropriations. Failure of the Congressional appropriation process is the closest analogy to the current failure of Congressional fundraising process. In this circumstance Congress has already enacted the budget appropriations , as solemn acts of law, but it has failed to provide the necessary funds through taxation or borrowing. In either scenario, government shutdown is the inevitable result. With significantly less than the full amount needed to pay all the bills and expenses of prior Congressional appropriations, President Obama has few options other than stopping all non-essential government activity and paying for as many of the essential functions that available funds and creative accounting allow.

If the Congressional impasse continues unresolved, the result will be exactly like a government shutdown for non-appropriation, except the long term consequences will be much worse.

Related post: Why Obama cannot use 14th Amendment on debt ceiling

The welfare system of the depression era New Deal that Reagan was complaining about  thirty years ago was totally revised in the 1990s during the Clinton administration. Aid to Families with Dependent Children (AFDC) was replaced with Temporary Assistance to Needy Families (TANF). The basic operating goal of the change was called “Welfare to Work.”

TANF is a Federal block grant to States.  Each State not only administers the program for its own residents, but each State has flexibility to design its own program and eligibility requirements within the broader Federal objectives. The States, not the Federal government, decide on the design of the program, the type and amount of assistance payments, the range of other services to be provided, and the rules for determining who is eligible for benefits. The Federal program has four main goals:

• To provide assistance to needy families so that children may be cared for in their own homes or in the homes of relatives;
• To end the dependency of needy parents on government benefits by promoting job preparation, work, and marriage;
• To prevent and reduce the incidence of out-of-wedlock pregnancies and establish annual numerical goals for preventing and reducing the incidence of these pregnancies; and
• To encourage the formation and maintenance of two-parent families.

With few exceptions, recipients must work as soon as they are job-ready or no later than two years after coming on assistance. Families with an adult who has received federally-funded assistance for a total of five years, or less at state option, are not eligible for cash aid under the TANF program.

The TANF program is temporary and time limited. After receiving benefits for no more than two years, there is a work requirement for continuing to receive benefits up to the five year lifetime limit. Single parents must participate in work activities for an average of 30 hours per week, or an average of 20 hours per week if they have a child under age six, for example.

The assistance provided by TANF is available only when there are children involved. Childless adults don’t qualify.  But, since there are two parent families, one parent families, zero parent families, and each family can have multiple children, the number of those receiving benefits through TANF can be confusing.  Consequently, I’ve chosen to look at the number of adults involved, as reported by the Office of Family Assistance,  Administration for Children and Families, U. S. Department of Health and Human Services.

There has been a steady decline in the number of participants in TANF since 2000, although the recent troubles have reversed that trend since 2008. In FY 2009 the amount of the annual block grant to States was $16.5 billion.  As of January, 2010, there were 1,078,413 adult participants. This is 0.35% of the entire U. S. population.

The welfare leeches of Ronald Reagan’s political rhetoric are gone. The country listened to Reagan and actually implemented program reforms to eliminate the possibility of perpetual welfare slackers.  It is time for current political rhetoric to catch up to the changes that were made more than ten years ago.

Please get up to speed. You can’t blame the Federal budget deficit on welfare queens  any more.

“HALF of America pays NO taxes. Zero. So they’re happy for tax rates to be raised on the other half that DOES pay taxes.”

It is a ridiculously false statement. In order to pay ZERO taxes you’d need to have zero earned income, never buy anything for which sales tax is collected and never pay for a telephone call. Also, you’d have to never buy alcohol, tobacco or gasoline. and air travel would not be an option.

Nearly everyone pays some taxes. I bet they even charge states sales tax in the prison commissary.

Assuming that Warren was meaning to say that half the American population doesn’t pay any Federal income taxes, it is not an occasion for much emotional angst. It’s not surprising that half the population didn’t have more than $9350 in income during 2010 when you consider those who are underage, those who stay at home to be moms or dads or to take care of elderly parents, those unemployed for lack of jobs, full time students, part time minimum wage workers, prisoners, the infirm and the disabled. Plus, those who are retired and living exclusively on Social Security retirement benefits don’t pay Federal income taxes.

So what if half of the American population doesn’t pay any Federal income tax? What’s your point Mr. Warren? When I was growing up, I lived in a house where four out of the five people living there didn’t pay income taxes. It was my mom, my two brothers and I who were the slackers.

So, the next time some talk show propagandist says with breathless disapproval, “Did you know that half the people don’t pay any income taxes AT ALL,” realize that he’s talking about somebody’s grandmother.

Facts are facts, but interpretation and analysis is something else. That the amounts of individual Federal income tax receipts for 2009 and 2010, as a percentage of Gross Domestic Product (GDP), are at seventeen year lows counts as a fact. The possible beneficial effects of increasing individual income tax receipts is just a suggestion. See: Top Federal income tax brackets 1950 – 2011

An ageing demographic is the main structural problem with the rise in Social Security costs and the trend that threatens the fiscal solvency of the U. S. Government. But, demographics are hard to control. The main method of influencing the demographic composition of the United States is through immigration policy. If it were possible to encourage enough young, healthy, well educated and hard-working individuals to immigrate to the United States, assuming there were good jobs available for them upon arrival,  the demographics could be shifted.

Current law prioritizes uniting family members and geographic diversity through the green card lottery.  Unlike many other countries, the United States places little importance upon the age, financial status or marketable skills of its immigrants.

“Give me your tired, your poor, your huddled masses yearning to breathe free, the wretched refuse of your teeming shore,” may have been a workable 19th Century sentiment, but a more intentionally self-serving National policy might work better for our own homegrown tired and retired. Maybe withdrawing the invitation to the “wretched refuse” might be in order.

Geeky legal stuff.

According to these federal guidelines agencies should continue activities that:

1.) Provide for the national security, including the conduct of foreign relations essential to the national security or the safety of life and property.

2.) Provide for benefit payments and the performance of contract obligations under no-year or multi-year or other funds remaining available for those purposes.

3.) Conduct essential activities to the extent that they protect life and property, including:

• Medical care of inpatients and emergency outpatient care.
• Activities essential to ensure continued public health and safety, including safe use of food and drugs and safe use of hazardous materials.
• The continuance of air traffic control and other transportation safety functions and the protection of transport property.
• Border and coastal protection and surveillance.
• Protection of Federal lands, buildings, waterways, equipment and other property owned by the United States.
• Care of prisoners and other persons in the custody of the United States.
• Law enforcement and criminal investigations.
• Emergency and disaster assistance.
• Activities essential to the preservation of the essential elements of the money and banking system of the United States, including borrowing and tax collection activities of the Treasury.
• Activities that ensure production of power and maintenance of the power distribution system.
• Activities necessary to maintain protection of research property.

This type of government shutdown happens when there is a budget appropriations impasse for political reasons. The guidelines for what to shut down and what essential governmental services continue is based on the assumption that funds are actually available to pay for those services. The Antideficiency Act prohibits the Federal government from entering into a contract for which the funds have not been appropriated, or not “fully funded” in a legal sense. Doing so would obligate the government in the absence of an appropriation adequate to the needs of the contract. The law does not address the situation in which appropriations have been enacted, but without enough cash in the checking account to pay the bills. Codified at 31 U.S.C. § 1341.

The 62 year average is 59.7%.

The louder the Democrats complain about a short term debt ceiling hike, the more likely the Republicans will give it to them, and it is a near perfect solution. The Republicans can claim coup points and Democrats can get what they want.