Sunday, July 17, 2011

FSA and the Debt Ceiling: Contract Provision

I don't know which government obligations have similar provisions, and I'm not a lawyer, but I suspect FSA is not bound to pay direct payments if there's no deal on the debt ceiling because of this provision (paragraph 3 P of the CCC-509 appendix):
Payments are subject to the availability of funds, compliance with all applicable laws and statutory changes and to limits on payments as may be provided for in the program regulations and it is specifically understood that any payments under this Appendix and the programs to which it applies are subject to statutory and regulatory changes including those that occur after the signing of the contract.
There's also a provision in paragraph 10 to reflect modifications by Congress--the bottom line is the contract isn't binding.  Congress is the 700 pound gorilla, although practical politics is the surety farmers have that Congress won't simply rip up the contract.

In theory then, if the Obama administration has to prioritize payments, these payment should be the tail-end Charlie.

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