The Budget Control Act Of 2011 Violates Constitutional Order

Herbert W. Titus and William J. Olson, FloydReports.com

 

In a Constitutional Republic of the sort that we thought we had, the process by which laws are made is at least as important as the laws that are enacted. Our Constitution prescribes that law-making process in some detail, but those who voted for the “Budget Control Act of 2011″ (“BCA 2011″) were wholly unconcerned about trampling upon required constitutional processes on the way to the nirvana of “bi-partisan consensus “to avert a supposed crisis. At least two titles of the bill now being rushed through Congress are unconstitutional.

First, the “Debt Ceiling Disapproval Process” in BCA 2011 Title III unconstitutionally upends the legislative process.

The Constitution’s Article I, Section 8, Clause 2 vests in Congress the power “to borrow Money on the credit of the United States.” As two of America’s leading constitutionalists, St. George Tucker and Joseph Story, observed, the power to borrow money is “inseparably connected” with that of “raising a revenue.” Thus, from the founding of the American republic through 1917, Congress — vested with the power “to lay and collect taxes, duties and imposts,” — kept a tight rein on borrowing, and authorized each individual debt issuance separately.

To provide more flexibility to finance the United States involvement in World War I, Congress established an aggregate limit, or ceiling, on the total amount of bonds that could be issued. This gave birth to the congressional practice of setting a limit on all federal debt. While Congress no longer approved each individual debt issuance, it determined the upper limit above which borrowing was not permitted. Thus, on February 12, 2010, Congress set a debt ceiling of $14.294 trillion, which President Obama signed into law.

However, a different approach was used when BCA 2011 was signed into law on August 2, 2011. Title III of the Act reads the “Debt Ceiling Disapproval Process.” Under this title Congress has transferred to the President the power to “determine” that the debt ceiling is too low, and that further borrowing is required to meet existing commitments,” subject only to congressional “disapproval.” For the first time in American history the power to borrow money on the credit of the United States has been disconnected from the power to raise revenue. What St. George Tucker and Joseph Story stated were inseparable powers have now by statute been separated.

Under the new process established by this bill, if the President determines, no later than December 31, 2011, that the nation’s debt is within $100 billion of the existing debt limit and that further borrowing is required to meet existing commitments, the debt limit automatically increases. The President need only to certify to Congress that he has made the required determination. Once the President acts, the Secretary of the Treasury may borrow $900 billion “subject to the enactment of a joint resolution of disapproval enacted” by Congress.

But this is not all. Title III also provides that if Congress fails to disapprove the debt ceiling increase in the amount of $900 billion, the President may again certify to Congress that he has determined that the debt subject to the new ceiling is within $100 billion and that further borrowing is required to meet existing commitments. So the Secretary of Treasury is authorized to borrow another $1.2 trillion. Indeed, the Secretary may borrow even more — up to $1.5 trillion if a proposed balanced budget amendment has been submitted to the states for ratification. As was true of the first round of ceiling raising and borrowing, the President and Secretary of the Treasury are constrained only by the possibility of a congressional resolution of disapproval which, itself, is subject to veto by the President.

By giving the President the authority to increase the debt ceiling and to determine that borrowing is necessary to meet the nation’s commitments, this bill….

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Downgrading America: The Inevitable Result of Debt Slavery

Fred A. Kingery

If you had been living on another planet the last three years, you would be shocked to learn that the credit-rating agency, Standard and Poor’s (S&P), has placed the current AAA credit rating for the debt issued by the U.S. Treasury on a “negative watch” status. Most of us who live on planet earth had already concluded that the credit worthiness of our sovereign debt would be downgraded—unless Congress and the president were to fix the nation’s debt problem. Although the financial markets reacted to this “negative watch” news as if it wasn’t really news, S&P did get the nation’s attention. After all, it was the first time since the attack on Pearl Harbor (70 years ago) that a downgrade on the outlook for U.S. Treasury securities had been issued. Like Pearl Harbor, Americans don’t have a minute to waste in responding to the threat.

What prompted this change in the credit outlook by S&P? To answer that question, consider the following….

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Shocker! Govt Spending Topped $11 Trillion Last Year

Terrence P. Jeffrey, CNSNews.com

If you look at the historical tables attached to President Barack Obama’s latest budget proposal, they say the federal government took in $2.165 trillion in revenues in fiscal 2010 and spent $3.720 trillion, leaving a federal deficit of approximately $1.555 trillion.

This looks like a horror story, of course. Yet the true story is more horrible. To find that story, you have to look at the financial statements quietly posted by the U.S. Treasury on the website of the Financial Management Service. These documents show the actual accounting for the federal government in much the same way your bank statements show the actual accounting for your household.

The Daily Treasury Statement published on Sept. 30, 2010–the last day of fiscal year 2010–itemized all the revenue the government received in that fiscal year and all the money it spent.

True federal spending for fiscal 2010, the Treasury statement said, was $11.5 trillion ($11,537,305,000,000.00).

Now, how can the White House budget claim federal spending was only $3.720 trillion in fiscal 2010, when the Treasury says it was $11.5 trillion?

The biggest reason is because the spending tables produced by the Office of Management and Budget to accompany the White House budget do not count the money the Treasury is obligated to disburse in any given fiscal year to pay off old Treasury securities–that is, old loans–that come due in that year.

In fiscal year 2010, according to the Treasury statement, $7.207 trillion ($7,206,965,000,000.00) in loans came due. Paying off old loans is by far the greatest annual expense the federal government faces.

After the $7.207 trillion the Treasury spent paying off old loans in fiscal 2010, the next two greatest expenses were federal entitlement programs. Treasury spent $571.5 billion paying Social Security benefits, and $513.7 billion paying Medicare benefits. The fourth greatest federal expense was paying defense contractors, who earned $399.1 billion for the year.

So, where did the government find $11.5 trillion to pay its bills?

The vast majority of it did not come from taxes. During fiscal 2010, the government brought in $2.038 trillion ($2,037,686,000,000.00) in tax revenue, including all individual and corporate income taxes, all payroll taxes, all excise taxes, and all estate and gift taxes.

At the same time, according to the Treasury, the government paid out about $467.9 billion in tax refunds, leaving net federal tax revenues at about $1.5697 trillion. If you also subtract that $467.9 billion in tax refunds from the government’s disbursements, that leaves a little over $11 trillion in spending.

That means the federal government’s expenditures of a little more than $11 trillion in fiscal 2010–not counting tax refunds–were about seven times the federal government’s net tax receipts of $1.5697 trillion.

Where did the Treasury get the additional money it needed? It borrowed even more than the $7.207 trillion in loans it paid off.

In fact, according to the Treasury, the government took out $8.6492 trillion ($8,649,171,000,000.00) in new loans in fiscal 2010, by selling new Treasury securities in that amount.

Now, if you think that is the end of this horror story, you are wrong. It is only the beginning.

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Obama’s Coming Bank Grab?

Ben Johnson, FloydReports.com

If you have enjoyed owning a car company, you’re going to love getting voting representation in several banks nationwide. Barack Obama’s Treasury Department is already “monitoring” 19 banks and may appoint new board members. The trouble? They took TARP money and have fallen behind on their payments. Almost as troubling, the mainstream press is presenting things as though they had never been better. Zachary A. Goldfarb at The Washington Post writes:

The Obama administration has begun monitoring the high-level board meetings of nearly 20 banks that received emergency taxpayer assistance but repeatedly failed to pay the required dividends, according to Treasury Department officials and documents. And it may soon install new directors on some of their boards.

The moves come as the number of banks that failed to make at least one dividend payment to the government rose to 132 in the last quarter. These “deadbeats,” as they are sometimes called, are virtually all community lenders and collectively received billions of dollars in taxpayer assistance.

In addition to those firms, seven others have failed, resulting in the total loss of the government’s investment.

The number of banks that have missed six or more dividend payments has reached 19, up from seven during the previous quarter. Under the government’s agreement with those firms, the Treasury now has the right to monitor their boards and appoint new members.

So much for the Barack Obama who said last April, “I don’t want to run auto companies, and I don’t want to run banks.” (To properly understand Obama, you must replace “don’t” with “desperately.”) He may insist he does not want to engage in this behavior — and he repeats it again, and again, and again.

The story goes on to reveal “a fifth of banks in the program, almost all of them small community lenders, are not paying the government dividends on time,” meaning they too are en route to an Obama-appointed bank board. The Wall Street Journal reported Sunday that as many as 98 bailed-out banks, which received $4.2 billion in TARP funds, are in danger of failing based on an analysis of their third quarter earnings results.

Will the new appointees….

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