The Case for Delaying Spending as the Debt Limit Nears

Negotiations over the debt limit remain ongoing, and the country is edging closer to the so-called “X Date” — that is, the first day on which payments due exceed the Treasury’s cash on hand. But what happens under these circumstances? Reports yesterday provided one good hint about the answer: The Treasury has started asking federal agencies to identify payments they can delay. But those reports also made this move seem cloudy and suspect — suggesting that legal doubts may even lead some agencies and career officials to resist the Treasury’s request.

But while the X Date presents many risks and uncertainties, this particular skepticism is misplaced. The authority of the government to delay spending has ample precedent, and the Treasury’s initial step of exploring a delay is far preferable to the unprecedented steps of the president issuing his own debt in violation of the debt limit, minting a giant platinum coin, or selling national parkland.

For starters, we have been here before. In the 1950s, the Eisenhower administration postponed defense spending as the debt limit neared. Twice during the 1970s, the Treasury briefly lost borrowing authority because of the debt limit and had to delay auctions. Throughout the 1980s, the government grappled with a remarkable string of conflicts over the debt limit and employed a variety of strategies to keep the government’s finances intact. Perhaps this time is different — the magnitude of government spending is greater, the market for Treasury securities is more important, and political polarization has made compromise harder. But the basic contours of the legal problem have been encountered many times before.

Relying on individual agencies to propose delays also finds precedent in the longstanding practice of government shutdowns — that is, what happens when Congress fails to pass an annual spending law. Like conflicts over the debt limit, showdowns over spending happen every couple of years, and understandably, readers might feel some mix of anxiety, boredom and confusion in attempting to tease apart the details. Because shutdowns recur, the Office of Management and Budget asks agencies to prepare and update a contingency plan — identifying which functions will stop and which will continue. (I say this as someone with vivid memories of working through the 35-day shutdown during the Trump administration.) 

If recent reports are correct, the current decentralized process of asking agencies — who know their own functions and authorities best — to propose delays reflects this well-accepted practice.

The legal authority for putting off spending is also well-accepted. There is legal precedent for a mismatch between the commands of a spending statute and the funds in the coffer. Sometimes Congress doesn’t provide enough money to accomplish the goals of its own spending programs, and the agency has to either ask Congress for more or engage in triage — setting priorities that do their best to achieve the goals Congress has established. As recently as 2014, the Supreme Court called “unremarkable” the proposition that the government may “prioritize its expenditures within the bounds established by Congress.”  

Recent reports have suggested that some agencies might resist delaying payments by referring to the 1974 Impoundment Control Act, a law that emerged from a series of budget and spending conflicts between Congress and the Nixon administration and that was intended to reassert congressional control over spending. But in some ways, this law shores up the government’s authority to postpone spending. For almost 50 years, both the Comptroller General (who works for Congress) and the Office of Management and Budget (which works for the president) have agreed that the law does not reach situations in which an expenditure doesn’t happen because of an “external” constraint, like the debt limit. Instead, it is pointed primarily at situations in which the Executive Branch acts with the intention of displacing Congress’s policy priorities. And the law itself specifically permits spending delays that “provide for contingencies.”  

This basic framework still leaves some questions unanswered. A recent lawsuit contends that the president doesn’t have too little authority to postpone payments — but that Congress, in fact, has delegated too much. In a recent paper, I’ve argued that Congress should propose clearer standards by which the president must prioritize when the government runs low on revenue. A couple of months ago, House Republicans proposed a bill that would do something similar. 

These developments would improve matters, providing more clarity to the public and guiding officials in the Executive Branch as they make difficult decisions in recurring debt-limit crises. But the Treasury’s recent moves are an uncontroversial start.

Conor Clarke is an incoming associate professor of law at Washington University in St. Louis and a former attorney with the Justice Department’s Office of Legal Counsel (2017-2023).