TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Monday, October 14, 2013

Gamage & Louk: Government Shutdowns, the New Fiscal Politics, and the Case for Default Budgets

David Gamage (UC-Berkeley) & David Louk (Ph.D. (UC-Berkeley) & J.D. (Yale) Candidate), Government Shutdowns, the New Fiscal Politics, and the Case for Default Budgets:

In nearly every area of law and governance, default policies exist when lawmakers cannot pass new legislation — typically the prior status quo remains in effect. To its detriment, U.S. budget making lacks workable defaults. At both the federal and state levels, this lack of defaults, coupled with a dysfunctional era of budgetary politics, has led to a number of state and federal government shutdowns and near-shutdowns.

Government shutdowns are the result of a perfect storm of contemporary politics: acrimonious budget negotiations characterized by partisan brinkmanship, game-of-chicken strategies, and strong anti-tax sentiment among many conservatives. Drawing on political science work on legislative negotiation theory and on several historical case studies of recent government shutdowns, this Article explains how these new fiscal politics result in regular budget negotiation failures, greatly increasing the risk of costly government shutdowns or near-shutdowns. Then, drawing on this diagnosis of budgetary dysfunctions, this Article advocates the adoption of default budgets policies — such as automatic continuing appropriations provisions, which maintain government operations in the event that legislators fail to pass a timely budget.

This Article explains how default budgets policies might be implemented to avert shutdowns and to stabilize the budget making process. Properly enacted, default budgets policies have the potential to mitigate the harmful consequences of budget negotiation failures and to restore sanity to this era of new fiscal politics.

Update: Wall Street Journal Law Blog, Putting Congress on Cruise Control:

Engineers and computer experts are trying to build a self-driving car that could reduce accidents by minimizing human errors on the road.

How about a self-driving Congress?

In a new paper, two legal researchers say the U.S. government could avoid future shutdowns by automating the federal budget process.

“Instead of having budgetary negotiation failures trigger government shutdowns, we propose that automatic continuing appropriations should maintain government spending in the interim until a new budget is passed,” write UC Berkeley law professor David Gamage and Yale Law School student David Louk.

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There will be no default in the true sense of the word. The national government is obligated by the 14th Amendment to pay principal and interest on the outstanding debt. The only "default" will be the national government's inability to borrow additional funds from the Federal Reserve that would finance future obligations and programs.

Posted by: Carlton Melton | Oct 14, 2013 4:05:33 PM