Monday, January 28, 2013

Has Boehner Snuck a Spending Freeze into the Recent Debt Ceiling Bill?

Ralph Benko is out with a column at Forbes that clearly appears to have come directly out of the John Boehner spin room. It's titled, How President Obama Lost His Shirt to John Boehner.

After reading the column, you will get the impression that Boehner can solve all and that he should be put in charge of the entire planet Earth. Benko hoists among other notions, the idea that Boehner won the recent tax battle with President Obama:
In retrospect, at the Battle at Fiscal Cliff, Boehner took President Obama to the cleaners. He did it suavely, without histrionics[...]Dazzled by Obama’s Ozymandias-scale sneer most liberals failed to notice that Boehner quietly made 99% of the Bush tax cuts permanent.
What Benko fails to mention is that most Americans were pushed over the cliff as Boehner (and Benko) failed to discuss, to bring up, or mention in any other way, that under the deal struck, taxes went up for almost all wage earning Americans, as a result of a 2% increase in the payroll tax. Fifty-three percent of the increased revenue that will be the result of the Boehner-Obama deal will come from the 2% payroll tax increase. With negotiators like Boehner "on the side of the American people," who needs negotiations?

All this aside, what I really find interesting in the Benko column is this comment:
Boehner, last week, again bested Obama by pushing the debt ceiling fight back to May.[...]  According to specialists, by structuring the law to allow new borrowing only to the extent of obligations “outstanding on May 19, 2013, exceeds the face amount of such obligations outstanding on the date of the enactment of this Act” Boehner effectively instituted a spending freeze.
In other words, it appears that the Boehner camp is now promoting this oblique wording as meaning that Boehner has somehow introduced a spending freeze.

Could this possibly be the case?

Benko links to an analysis of the Bipartisan Policy Center, which writes:
The Bipartisan Policy Center (BPC) notes that the debt limit provisions are novel, contain substantial complexity, and may have implications that we have not foreseen. The following is BPC’s initial interpretation.

  • Upon enactment of this bill, the debt limit would be temporarily suspended.
  • Treasury debt issuance operations would immediately return to normal and Extraordinary Measures currently in use would begin to be unwound.
  • On May 19, 2013, the debt limit would then be automatically increased by the amount of debt above the current statutory limit “necessary to fund commitment[s] incurred by the Federal Government that required payment before May 19, 2013,” minus the amount of outstanding Extraordinary Measures in use on the date of enactment.[...]
Here's the full text of the part of the Act that is relevant to this discussion:


    (a) Suspension- Section 3101(b) of title 31, United States Code, shall not apply for the period beginning on the date of the enactment of this Act and ending on May 18, 2013.
    (b) Special Rule Relating to Obligations Issued During Suspension Period- Effective May 19, 2013, the limitation in section 3101(b) of title 31, United States Code, as increased by section 3101A of such title, is increased to the extent that--
      (1) the face amount of obligations issued under chapter 31 of such title and the face amount of obligations whose principal and interest are guaranteed by the United States Government (except guaranteed obligations held by the Secretary of the Treasury) outstanding on May 19, 2013, exceeds
      (2) the face amount of such obligations outstanding on the date of the enactment of this Act.
    An obligation shall not be taken into account under paragraph (1) unless the issuance of such obligation was necessary to fund a commitment incurred by the Federal Government that required payment before May 19, 2013.
Only in Boehnerville, D.C. would this be considered a spending freeze. What the Act really does is, of course, the exact opposite. It allows spending to go on unchecked by debt ceiling concerns until May 19. If Boehner really wanted a spending freeze to be enacted, he could have simply allowed government spending to hit the debt ceiling, that would have resulted in a spending freeze and perhaps better, spending cuts. The suspension of the debt ceiling simply prevented this from taking place. If Benko thinks that some new magic trick will not be instituted before the May 19, 2013 deadline to again raise the debt ceiling and prevent this "spending freeze,"  well then, there is a fog making machine here in San Francisco that I would like to sell him.

Bottom line: There is no spending freeze, there will be no spending freeze.

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