US Government Debt Different - Finance Department - University of ...

Jeremy Kreisberg & Kelley O’Mara (Under the Supervision of Professor Howell Jackson)287Theory 1: The President is Bound by the Debt Limit, and Treasury MustStatus of Funds utilizedduring DISPInterest Payments toBondholders(Aug. 2 – Aug. 31)Mandatory Spendingon Entitlements(Aug. 2 – Aug. 31)AppropriatedDiscretionary Spending(Aug. 2 – Aug. 31)Proportion of totalexpenses paid Aug. 2 –Aug. 31Outstanding Debt onAug. 31Follow“First In, First Out” ProceduresDISP likely would have been extended; Funds wouldnot have been made whole on Aug. 2Interest payments delayed on a FIFO basis, treatedequally with all other obligations.Technical default on debt obligations as of August5 as a result of delinquency on a $1 million interestpayment. 205Payments delayed on a FIFO basis, treated equallywith all other obligations.Payments delayed on a FIFO basis, treated equallywith all other obligations.59% 206$14.294 trillion, as approved in Feb. 2010 legislation205 206 Theory 2: The President is Bound by the Debt Limit, butTreasury Can Prioritize Spending ObligationsA. The President Can Prioritize at His DiscretionIf the national debt hits the statutory limit, the President may have theauthority to breach his obligation to spend the money appropriatedby Congress. The primary justification for prioritization is theaforementioned position of the Government Accountability Office,which reasoned that Treasury could prioritize its obligations in thepublic interest because no law requires a FIFO procedure. 207 In orderto effectively prioritize spending obligations, OMB may “apportion”funding pursuant to the Antideficiency Act. 208205Id.206Id. During Aug. 2 – Aug. 31, 2011: Inflows = $186.404 billion, Expenses = $313.564billion.207GAO, supra note 176.208See 31 U.S.C. § 1512 (1982). The Antideficiency Act, composed of multiple statutoryprovisions, provides rules for federal employees with respect to appropriations. Gov’t AccountabilityOffice, Antideficiency Act Background (2006) (available at http://www.gao.gov/legal/