Despite silence and zero denials from the conventional media outlets, our post Media Gets It Wrong — Debt Ceiling Suspended (Permanently), Not Raised, appears to have got it right and offers a cautionary observation on prospects for the value of the Federal Reserve’s dollar in the months and years ahead.
Despite a big to-do about the impending Congressional battle over raising or refusing to raise the debt levels in one way or another (ceiling began in 1917), the newly enacted law of the land in the U.S. remains unmentioned in mainstream media, with annual theater proceeding just as it has for hundreds of years.
On October 20, 2013, U.S. law changed to transfer final spending authority from the legislative to the executive branch. The little-noticed yet epic transfer of power was enacted as part of the Continuing Appropriations Act passed on October 17, 2013.
Section 1002 allows the U.S. President to submit to Congress a “certification” that, unless the debt limit is again suspended, the Secretary of the Treasury would be unable to issue debt to meet existing commitments.
Subsection (c) of the above enacts a “Special rule” relating to obligations issued during suspension period. --Effective February 8, 2014, the [debt] limitation … is increased by section 3101A (and section 2 of the No Budget, No Pay Act of 2013 is increased) to the extent... --(A) ...of obligations issued under chapter 31. To translate the preceding legalese, the existing debt ceiling is automatically raised to cover obligations already incurred under chapter 31 with the prohibition that more debt can’t be issued “unless the issuance of such obligation was necessary to fund a commitment incurred by the Federal Government that required payment before February 8, 2014.” Could advance appropriations play in?
We ask because those too were addressed in amendments to, as unanimously approved SA2005 named them “An Act making continuing appropriations for the fiscal year ending September 30, 2014”, and as H Con Res 25 and Sec. 402 of the companion bill lay out a “point of order against advance appropriations,” then duly appropriate in advance for FY2014, with a host of other exceptions. In other words, appropriations were advanced this one time, and prohibited in the future, thus forcing the current budgeting process.
Now that the above precedents are in the law, language can be “rolled” into future spending bills suspending the ceiling with respect to authorized spending. So for fiscal year 2014, we’re covered. Granted, right now in the budgeting process what’s important to representatives, is that government gets more cash than tax revenues, for fiscal year 2015. It’s only later down the road that the public will become aware of or seek to reverse the shift in the “power of the purse.” To us all of this together, and the initiation of the language, explained why Treasury bill yields have remained less jittery than last fall, further unlike last fall, to date no institution has explicitly publicized they wont own close-dated maturities, though discounts exist.
The new law also established procedures for Congressional disapproval of a presidential certification the US would be unable to issue debt to meet existing commitments without suspending the limit.The first, H.J. Res 99 along with its companion bill, S.J. Res 26, occurred on October 28, 2013, with the “Latest Major Action” for the bill (on October 29, 2013), ended with a “motion to proceed to consideration of measure rejected by Yea-Nay Vote. 45 - 54. Record Vote Number: 220.)”, and procedures for executive suspension of the debt limit, but also provides for a president to veto that bill of Congressional disapproval. Since there isn’t a U.S. Congressional supermajority fighting federal expansion, there’s no need to make a lot of noise about this new process to raise the federal debt by suspending the ceiling. The new provision gets no press, the precedent strengthened with each year that passes.
In essence, what government is doing is keeping up the “dog-and-pony show” pretense of a debt ceiling power while avoiding the real market risk—and for the first time since our nation’s founding, the technical barrier to the expansion of indebtedness to a legalized monopoly has been sacrificed. This, we fathom, is why Jim Rogers said that weekend last October, “It’s all over.” “Unlimited.” The only way the shift in fiscal power could be reversed would be a Congressional supermajority capable of overturning a presidential veto of a debt limit suspension disapproval bill, and that’s why for as far as the eye can see we expect bills retaining or expanding the language.
One of the ramifications of the continued expansion of the debt ceiling, as we mentioned initially (and the gold market responded to, initially) is the effect on the future exchange value of the dollar. Down.
As usual, any errors remain open to comments and correction.