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

Jeremy Kreisberg & Kelley O’Mara (Under the Supervision of Professor Howell Jackson)291Theory 2A: The President is Bound by the Debt Limit, but CanStatus of Funds utilizedduring DISPPrioritize at His DiscretionDISP likely would have been extended; Fundswould not have been made whole on Aug. 2Interest Payments toBondholders(Aug. 2 – Aug. 31)Likely to be prioritized and paid as scheduled ($38billion) 230Mandatory Spendingon Entitlements(Aug. 2 – Aug. 31)AppropriatedDiscretionary Spending(Aug. 2 – Aug. 31)Proportion of totalexpenses paid Aug. 2 –Aug. 31Outstanding Debt onAug. 31230 231 232 233Likely to be prioritized and paid as scheduled(Social Security: $51 billion; Medicare: $32billion) 23134% 232 of discretionary expenses could have beenprioritized for payment at the Executive’s discretion,after payment on interest and entitlements.59% 233$14.294 trillion, as approved in Feb. 2010legislationB. The President Must Prioritize Bondholder PaymentsIf the President is bound by the debt limit, the Public Debt Clausemay provide a directive to prioritize “public debt.” 234 Most academicsagree that “public debt” includes bond payments. 235 However,others advocate a broader interpretation of “public debt” to includestatutory spending commitments or all contractual obligations. 236A concern arising from a broader interpretation is that, if “publicdebt” includes all statutory spending commitments, the Public Debt230Id.231Id.232Id. Inflows of $186.404 billion - $37.951 billion in interest payments - $31.793 billion inMedicare expenses - $51.214 billion in Social Security expenses = $65.446 billion in remainingrevenue for $192.606 billion in expenses233Id. Inflows = $186.404 billion, Expenses = $313.564 billion during Aug. 2 – Aug. 31,2011.234See Tribe, supra note 144. Various interpretations of “public debt” would determine whichpayments must be prioritized. While the government would not be able to fulfill all obligationspursuant to a broad interpretation, inclusive of all obligations, it may be able to prioritize“public debt” if it includes only bond payments or bond payments and “contractual” obligations.235See, e.g., Abramowicz, supra note 103, at 20.236See, e.g., Buchanan, supra note 107.