By Patrick A. Heller
Commentary on Precious Metals Prepared for CoinWeek.com …..
The Continuing Appropriations Act of 2014 enacted this week proves once more that you can count on politicians to think of themselves first, and the people last.
Section 1002 of this law has its own title, “Default Prevention Act of 2013.” This section effectively abolishes the federal debt ceiling—permanently.
This section lays out the following process: Once the president certifies to Congress that the Treasury is close to reaching the temporary debt ceiling, each chamber of Commerce is required to vote on the issue of raising the debt ceiling. Should an increase in the debt ceiling be rejected by either chamber of Congress, the president has the authority to unilaterally reject the Congressional rejection. An increase in the debt ceiling will then be put into place.
Yes, it is theoretically possible for the Congress to override the president’s rejection of Congress’s rejection of the increase in the debt ceiling. However over 2/3 of both the Senate and the House of Representatives must vote for the override. That is never going to happen. Here’s an example why I say that.
Several years ago, the Colorado legislature voted to re-enact a sales and use tax exemption on the retail sales of rare coins and precious metals in that state, which the governor vetoed. Even though the original legislation passed in both chambers with more than 70% support, more than would have been needed to override the governor’s veto, no override vote was ever attempted. As one legislator told a representative of the Industry Council for Tangible Assets (ICTA—the rare coin and precious metals dealers national trade association) at the time, the legislators who were members of the same political party as the governor would never make their governor look bad to the public by voting to override his veto. (Incidentally, the Colorado exemption was reinstated less than two years after this gubernatorial veto)
For all practical purposes, the federal government no longer has a debt ceiling that creates any obstacles to higher spending and larger budget deficits. Inevitably, as I have already predicted, this change in the law will facilitate the expansion of inflation of the money supply (called “quantitative easing” in Washington), not to the reduction or “tapering” of inflation that the Federal Reserve tried to fool people from May to September into expecting. As this acceleration of inflation occurs, that will hasten the decline in the value of the US dollar. I know I have said this several times previously, but maybe it’s time for Americans to copy what hundreds of millions (maybe even billions) of people are doing in Asia, the Middle East, and other nations—unloading US dollars and buying physical gold and silver.
Patrick A. Heller was honored with the American Numismatic Association 2012 Harry J. Forman Numismatic Dealer of the Year Award. He owns Liberty Coin Service in Lansing, Michigan and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Other commentaries are available at Numismaster ( under “News & Articles) and at CoinInfo. His award-winning radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 AM Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com. He is also the financier and executive producer of the forthcoming movie “Alongside Night” (trailer posted at http://www.youtube.com/watch?v=sTZ8vn45Cds).
Failed cloture. This bill is provisionally dead due to a failed vote for cloture on October 12, 2013. Cloture is required to move past a Senate filibuster or the threat of a filibuster and takes a 3/5ths vote. In practice, most bills must pass cloture to move forward in the Senate.
I’m having a difficult time finding where it says the treasury was given the right indefinitely. It does say until early 2014, but your first link doesn’t mention anything else and your second link is referring to an otherwise dead bill.
Paul, You are technically correct. The authority theoretically expires in early 2014. However, when President Nixon closed the gold exchange window in August 1971, that was a “temporary” measure. Now, 42 years later, it is still “temporary.” As we have already seen in the past couple of years with past debt ceiling disputes, you can pretty much count on this law being temporarily permanent.
The debt ceiling was a screwy gimmick to begin with. The
Constitution gives Congress the power to appropriate funds — i.e., to mandate government spending — whether or not the spending can be funded without borrowing. It’s axiomatic that Congress can’t override the Constitution. So Congress can’t deprive itself, let alone a future Congress, of a power
delegated to it by the Constitution. Therefore, if Congress passes a bill saying that it can’t mandate spending that would increase the Federal debt above some specified amount, the resolution would have no binding *legal* effect — although Congress might choose to abide by it for political reasons anyway. If the next Congress were to simply ignore the ceiling and pass an appropriation bill mandating spending that would increase the Federal debt above the ceiling, without bothering to
amend the debt-ceiling resolution, and the President then signed the appropriation bill, would the appropriation be be void because it was inconsistent with the debt ceiling? The correct answer, in my opinion, is no, the appropriation would be legally effective.
But the revision of the debt-ceiling legislation compounds the screwiness.