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

Jeremy Kreisberg & Kelley O’Mara (Under the Supervision of Professor Howell Jackson)255 256C. The President Must Prioritize Bond Payments and Other“Obligations”295“[P]ublic debt” may refer to certain obligations with a wider scopethan mere bond payments and a narrower scope than all statutoryobligations. Professor Abramowicz proposes a definition of “publicdebt” which is limited to statutory “agreements” and excludes“gratuitous promises.” 257 Social Security may be included because thetrust fund is constituted in part by recipients’ tax payments, and futurebeneficiaries may rely on these payments. 258 It is unclear whetherMedicare fits the form of an agreement because its contributionsand benefits are more attenuated than Social Security. 259 Underthis interpretation, the Public Debt Clause would also protect thediscretionary programs that represent contractual obligations, suchas payments owed to contractors or pension funds. 260Professor Calvin Massey argues that the “pensions and bounties”phrase of the Public Debt Clause 261 provides an indication ofwhat is included within the scope of “public debt.” 262 Under thisinterpretation, the President has a constitutional obligation toprioritize bond payments and “old-age pensions under SocialSecurity, military pensions, and other federal pensions.” 263255Treasury Direct, supra note 199.256Id. During Aug. 2 – Aug. 31, 2011: Inflows = $186.404 billion, Expenses = $313.564 billion,Interest Expense = $37.951 billion.257Abramowicz, supra note 103, at 19-21. Professor Abramowicz explains, “[f]irst, a governmentpromise is “authorized by law” only if it is contained in a congressional statute. Second,a debt is “[a] sum of money due by certain and express agreement.” Applying this definitionto the Public Debt Clause, the United States incurs a public debt only if a statute embodiesan agreement, or, more restrictively, only if the government issues a written agreement. Sincea gratuitous promise does not ordinarily constitute a legally enforceable agreement, the Clausewould be further limited to governmental promises made in exchange for good consideration.”Id. at 20-21.258Id. at 36.259Id. Medicare “Part B, offering supplemental medical insurance, is funded primarily throughgeneral tax revenues.” Id. at 36 n.156.260Id. at 35-36. “For example, government civil-service pension payments and money owedto independent contractors represent unambiguous obligations that the government owes becauseof past agreements in which the debt-holders have already fulfilled their part of thebargains.”261U.S. Const. amend. XIV, § 4: “The validity of the public debt of the United States, authorizedby law, including debts incurred for payment of pensions and bounties for services in suppressinginsurrection or rebellion, shall not be questioned.” (emphasis added).262See Massey, supra note 141.263Id.