A country’s annual budget contains the provisions for spending and borrowing in the financial year, doesn’t it?
So why was the U.S. debt ceiling, subject of these weeks’, artificial crisis, apparently part of separate legislation, and not part of the FY 2011 budget?
I’ve wondered this too. My guess has been that reality did not meet the budget’s expectations. In other words, not as much money came in as the budget was planning on. So the gov’t ran out of money to pay its expenses with.
I imagine it would be illegal to spend more than the budget allows. But if less money comes in than expected, it becomes a practical problem, not a legal one.
It’s a question a lot of Democrats are asking at present. Every dime the government collects in tax and every dime the government spends has to be authorized by Congress. It doesn’t authorize ‘borrowing’ as part of the budget, but obviously if the amount of tax they order is lower than the amount of spending they order, the government has to borrow to cover the gap. There’s no obvious reason why Congress should also be allowed to decide whether the country can borrow money or not; indeed if Congress hadn’t raised the debt ceiling it would’ve caused a contradiction, because Congress would have ordered the executive branch to spend an exact amount of money, would not have ordered enough tax to pay for it, and would have prohibited any borrowing to cover the gap. Whatever the executive branch had done in that situation, it would’ve violated Congress’s orders.
As such, between 1979 and 1997, Congress had in place what was known as the Gephart rule, which said that whenever Congress passed a budget they also automatically raised the debt ceiling as part of it. But in 1997, Newt Gingrich and the Republicans scrapped the Gephart rule in order to try and force a standoff with President Clinton over the debt ceiling. Clinton refused to negotiate over it and Gingrich didn’t push the issue much further. During George W. Bush’s presidency the Democrats never threatened to not raise the debt ceiling (although some of them did vote against it symbolically, including Obama in 2006). In 2009 and 2010 Democrats controlled both Houses of Congress so they were able to raise the debt ceiling with no hassle.
This year was the first time that anyone actually held the debt ceiling hostage, and Mitch McConnell has already said that they will do it again every time in future. Essentially the only reason it exists nowadays is because the Republican party finds it useful to use as leverage to force policy concessions.
The budget is not linked to revenue; the federal government is free to borrow money to implement legislation when revenues do not provide enough to cover appropriations.
That’s exactly what I wrote: “… if less money comes in than expected …”
Or are you saying that they are allowed to appropriate for things that they haven’t budgeted for? That would defeat the purpose of a budget, no?
Revenues are somewhat unpredictable, especially in the case of major economic disruption.
IIRC, one consideration is that originally, when the government set out to raise money, they got specific permission for a specific issuance of bonds. Historically this has morphed into the simplest of answers to the question Why? -Just because. Congress started by approving all debt issues, and still does. Whether they are required to is not clearly stated in the constitution - who wants to go for re-election as the president who decided they could borrow anything they wanted?
Remember that there never really was a FY 2011 budget, and lawmakers may have believed that adding in the debt ceiling to those already-contentious negotiations might have cratered any continuing resolution completely.
The federal budget is nothing more than the sum of all appropriations. The federal budget does not limit spending to projected revenue. The last time we had a balanced budget where appropriations were less than or equal to revenue was 1957.