From a technical level, there’s probably no effective way to do this. Let’s say that you have a checking account at a bank, for which you have several checkbooks, each of different colors. To run your business, you have it organized so that your employees write blue checks for payroll, yellow checks for utilities, pink checks for office supplies, etc. Your accounting department is writing these checks all the time and sending them out, and everything works fine when you have a sufficient balance.
Now business turns bad and you have no overdraft insurance. Can you call your bank manager and say, “Today, when my customers deposit checks into their accounts, I would only like you to process the orange ones. No others. Kthxbye.” The bank manager would say, there’s no way for the bank to physically do that – you have to manage your cash by how you send out checks.
Now you would have to manage on a daily basis within your company which color checks get written, whether you have enough money to cover those that are written, plus worry about what happens if someone decides to hold on to their check for a month, as opposed to cashing them right away. You know what this means right away: your business turns into a clusterfuck, and the cost of doing business becomes very great for very little output.
Although the analogy isn’t exact, that’s what happens if the flow of money from each agency (each color checkbook) has to be metered by availability of funds, rather than the liquidation of contractual obligations.
From a legal perspective, this is uncharted territory. The Impoundment Control Act generally prohibits the President from refusing to expend funds, but with a slightly different twist. Impoundment is when a President, for policy reasons, decides that certain funds shall not be spent and should effectively be a cancellation of appropriations. He’s saying, “I don’t want to spend this money, ever, because it’s for a stupid thing I disagree with.”
The President has no power to impound funds. It’s illegal. If he never wishes to spend money on something, he must propose a rescission to Congress, which would have to result in a new law being passed to eliminate that appropriation. This never ever happens.
However, there is a normal process by which the Executive Branch attempts to spend funds and for non-policy reasons, it simply is unable to. Funds provided to agencies are usually limited to a certain period of availability: typically a year or two, sometimes longer, as the law directs. There’s almost always a little bit of money that remains unspent when the funds expire, and that is not illegal. Maybe contracts came in lower than expected; maybe a program was cancelled because it wasn’t working out, maybe inflation was less than predicted. That’s just what happens in life, and nobody is breaking the law because an agency wasn’t able to spend all its money for unintentional reasons.
Now, there’s no law providing a blueprint for how to deal with the lack of money in the Treasury. There’s a law providing a blueprint for what happens if there is money in the Treasury but a lack of spending authority, which is what we have right now.
But my opinion is that the President would obviously have to make some kind of decisions on how limited dollars would be spent, and given the totality of circumstances, that there is no way that the President could be accused of breaking the law if his decisions fit some kind of understandable framework that is not overtly a means of punishing certain constituencies but not others.
So, in my view, if the President decided that debt service and Social Security would be paid to the best of the Treasury’s ability, but no money for procurement contracts, etc., that would be perfectly legal and acceptable. However, if the President said that only contracts and workers in California, New York and Illinois would be paid, that would not be in accordance with the very vague laws that are on the books.