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As a result of the shutdown, military death benefits will not be paid to soldier's spouses. The House passed a bill to appropriate funds for this purpose, but the President announced the the Pentagon has entered into an agreement with Fisher House for them to pay the death benefits, and then after the shutdown ends the government will repay them.

Under what authority can the Executive take out loans without Congress's approval?

If they do have this power, why can't they end the shutdown immediately (FED reserve loan)?

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    I'm not so much debating the term loan, but that it came from the executive branch. The article appears to point out that it's the Pentagon working directly with the charity. – user1530 Oct 10 '13 at 19:18
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    @DA. - Pentagon is part of executive branch, ain't it? – user4012 Oct 10 '13 at 21:41
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    I suspect that Fisher House will pay the money, which may constitute a loan but is from Fisher House to the decreased veterans families. The Pentagon is bound to pay the benefits anyway, and when they are able to do so at the end of the shutdown, the money that should go to the decreased veterans families will go to Fisher House. The Pentagon hasn't received any money and so hasn't taken out a loan. – DJClayworth Oct 11 '13 at 0:45
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    The Pentagon has not received any money. Therefore they are not 'repaying' anything. And seriously, are you really claiming that it is better to let deceased veterans families go without their money, just because you want to insist on your definition of the word 'loan'? – DJClayworth Oct 11 '13 at 1:01
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    So are you actually admitting that you asked this question to make a political point, rather than to get an answer? – DJClayworth Oct 11 '13 at 13:05
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The executive branch has not taken out a loan, and has not increased the debt. Since this seems to be confusing, let's go through it step by step. We'll consider a hypothetical veteran's family who are owed $10,000 in death benefits. (I have no idea if the sums involved are that, or more or less).

  1. At the start, the government owes the veteran's family $10,000. Nothing Congress has done has changed that - they have only prevented the government from actually paying it. Government owes $10,000.
  2. Fisher House pays the family $10,000.
  3. The government agrees to pay the $10,000 they owe the family to Fisher House instead. The government still owes $10,000. No change in the amount owed.

There is no increase in debt. The government has taken out no loan. They have simply agreed that the money they owe will be sent to someone else instead. This could, if necessary, be handled even more at arms length by having the money still paid to the veteran's family and having them pay it back to Fisher House. This sort of thing happens all the time in the finance world, and nobody considers it 'taking on more debt'. And, as LateralFractal says, this may well have been done without a binding contract on either side.

And since this is a site for politics questions, not finance questions, I draw your attention to LaterealFractal's other point - "punching war widows in the face is bipartisan suicide for a politician".

EDIT: The questioner wants to know why the same approach can't be applied to end the entire shutdown. There are a number of reasons.

  1. It creates debt. As we saw above, the government already owes the verterans families money - it just can't pay them right now. When the shutdown ends they will be paid. However if a government worker is ordered tp come to work during the shutdown, then that creates the obligation by the government someday to pay them. It's illegal for the executive branch to do that unilaterally without congressional approval. The bill to retroactively pay workers is OK, because it's passed by Congress.
  2. You need to find an organization with the right purpose. Fisher House exists to help war veterans' families. Giving them money when their government payments stop would certainly fall within that remit. However there is no organization whose job is to pay government workers when they are furloughed. The Federal Reserve can't do it, any more than they are allowed to manufacture soap or buy a gold mine.
  3. The amounts involved. I'm not sure how much money is involved with Fisher House, but its probably no more than a few million. The wages of furloughed workers are counted in the billions each month. No organization is going to loan the government that much money without payments of interest and a formal agreement, neither of which the executive branch is able to make without congressional approval.
  4. The likelihood of repayment. While Congress has already voted to give backpay to the workers, they could reverse that at any time. An organization lending that amount of money will need cast-iron guarantees that it will get it back. Fisher House is probably relying on the political unpopularity of screwing over veterans charities. Government workers don't have that level of immunity. Especially not in the amounts we are talking about.
  • At the start, I owe $100,000 for a house, I choose to get a mortgage (a contract to repay a debt) from City Bank. City Bank pays the home seller $100,000 for the house. I agree to pay the $100,000 I owe the home seller to City Bank instead. I still owe $100,000. No change in amount owed. I don't think you understand what a loan is. – user1873 Oct 11 '13 at 13:47
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    I'm not going to argue with you. Either you don't understand basic finance or you are just arguing for the sake of it. Either way I'm done. – DJClayworth Oct 11 '13 at 14:06
  • @user1873 there's the legal definition of loan (ie, a contract), and then there's your loose definition. Given this is politics, I think the rules all revolve around the former...not the latter. – user1530 Oct 11 '13 at 15:45
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From what I can tell the Pentagon has managed to evade the spirit if not the wording of the Antideficiency Act; but as you can imagine no one is kicking up a ruckus about it since these are payments to war widows. A safe bet by the Pentagon - as punching war widows in the face is bipartisan suicide for a politician. Though some officer or desk general might quietly retire in a year's time if a scapegoat is needed.

As Fisher House is a charity, it is also possible that no binding contract to reimburse has been signed and so the Antideficiency Act hasn't been breached.


Update: I realise I didn't directly answer the question as worded, so an addendum:

Can the Executive Branch legally enter into a contract to repay Fisher House?

If the Executive already had a contractual agreement (fixed or open-ended) to reimburse generic charities or Fisher House specifically prior to the shutdown; these contracts still stand. Any restructuring of these contractual obligations also stands providing new debt isn't created due to the restructuring. Since governments tend to have AAA bond ratings - the risk is about as low as cash and so DJClayworth's answer comes into effect: Bob gives Sue cash to give to Mary.

The Bob => Sue "cash" isn't the same as the Sue=>Mary cash, but as cash is an IOU from the rest of the world; any extremely low risk IOU is cash; and so Sue can treat Bob's IOU that way.

But it is iffy whether Bob can shift the owner of an IOU or create and delete IOUs in this fashion. Basically Bob might not have a legal leg to stand on if Mary still demands Bob's original payment to Mary after the shutdown; Sue's charitable payment being neither here or there. Of course it might be that Mary's payments from Bob were always means-tested and so any charitable donation voids Bob's responsibilities. Arg. This gets complicated. Why can't a government just work properly?

Under what authority can the Executive take out loans without Congress's approval?

None or N/A depending on context. As the emergency clauses of the Antideficiency Act are essentially Congress' approval of Executive discretion. Wrap your head around that logic, at least in the current political climate.

If they do have this power, why can't they end the shutdown immediately (FED reserve loan)?

If they did have this power (USA on Earth-2), the current shutdown simply "splits" into two parts:

  • Part A) Executive can now spend money. For this part, the shutdown is "solved".

  • Part B) The Congress no longer has the power of the purse. For this part, the shutdown remains unresolved until Congress reconciles with itself or the appropriate article of the constitution is altered or reinterpreted.

  • I would however advise dear readers that a contradiction between what the Pentagon does and what the Anti-Deficiency Act demands needn't indicate rank hypocrisy but simply an example of how convoluted these laws are. The bicameral legislature at the moment is essentially saying "I'm thinking of a number between 0 and 100. What is it?". The answer is known when both chambers agree and unknowable to the executive while these chambers disagree. The executive is dragged into these shutdowns because it is a highly visible role and by definition it has to side with one chamber in a two-party system. – LateralFractal Oct 11 '13 at 14:37
  • I don't understand the last part. In the first part you are indicating that they do have the power, because they evade the spirit of the law, but are filling the letter of the law. In the last part ("if they have the power, why not end the shutdown"), you say If they did. Do they or don't they? Your last section makes this answer seem wishy-washy, and isn't answering the question posed. (If power, where. If power, why can't they end the shutdown, Congress has already promised to pay, so no new debt, right? – user1873 Oct 11 '13 at 14:56
  • @user1873 problem is, we can't extrapolate the ability to evade the intent of the Act in a specific context with an ability to evade the intent of the Act everywhere for everything; or the political will to do so if they could. I'm thinking the Act can't be evaded that easily and it only seems so in this instance because all parties are turning a blind eye to allow war widows to get paid. The simplest solution to protect against future shutdowns is to either give one chamber of Congress sole control over appropriations; or get rid of the need for CRs while negotiating the budget. – LateralFractal Oct 11 '13 at 15:05
  • @user1873 FYI, I'll need to log off and do other things for a while. Talk to you tomorrow if further clarification is still needed by then. – LateralFractal Oct 11 '13 at 15:07
  • Let's say I'm a war widow. Fisher house pays me $100,000 in benefits, since the federal government is shutdown. That's fine; it's done outside of the government. Then, after the shutdown is resolved, what gives the government the legal right to pay Fisher house the $100,000, instead of me? That is where it breaks down. If Fisher house had given me the money with a contract saying I'd pay them the money back once I get the federal money, that would be different... but that doesn't seem to be what's happening. – Ask About Monica Oct 11 '13 at 17:11

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