Bloomberg Government has a nice interactive piece on the choices facing the Department of the Treasury and the President should Congress fail to increase the debt ceiling. What would you do?
Be aware that the problem is much more complicated than this indicates since it will be a day by day situation. Having enough money in hand to pay Social Security at some point in the month is not the same as having money in hand to pay Social Security when it is due. Also, and probably more important, there is the serious problem of rolling over existing debt. That debt will have to be paid off before more debt is issued. Paying off the existing debt that comes due in August will take a lot of money in hand. You would hope that thereafter new Treasury bills and bonds could be issued in the same amount as was just retired but it is not clear that people would buy newly issued Treasury bonds if the debt ceiling is not raised.
4 comments:
People, especially Congress, do not realize how costly contingency planning is for the government. The same thing happened with the recent possible shutdown. So many hours and resources used to plan for something that might happen. And then a last minute reprieve. Yes, Congress--eat your peas and eat them now!!!
Pay $169.2 billion: Interest on Debt; SS benefits; Medicare; Military pay; VA programs; TANF; Food stamps; federal salaries; SBA; HUD; Energy; Federal Highway Admin.; FAA; EPA; CDC; GSA; Justice; Labor; Federal Transit Admin; HHS grants; NASA; Homeland Security
Postpone:
Other spending -- if Treasury cannot identify it, it can probably wait
*Agency for International Development -- this can afford to be postponed
*Education Dept -- bloated and inefficient agency filled with waste and duplicative programs -- postponing payment provides incentive to fix the mess
*IRS tax refunds -- if you are still waiting for a tax refund in August, you can probably afford to wait till Sept.
*Unemployment insurance -- provides incentive for long-term unemployment to actually look for work (but if you want UI paid, then a collection of smaller payments to various govt agencies could be postponed instead)
*Defense Vendor Payments -- they are vastly overcharging the DOD anyway, no reason they cannot wait a little while
*Medicaid -- ERs are required to treat all patients regardless of finances so those on Medicaid have access to care if absolutely necessary until postponed payments can be made; plus Medicaid payments are notoriously late anyway -- no reason why any health care provider would have to deny care to Medicaid patient in August
Of course, in reality, the Treasury will not have to choose an all or nothing approach to each component of government debt/spending. The Treasury could provide the Education Department, for example, with just enough money to allow for it to perform its core functions and withhold the rest until later.
Stop taking new applications for Social Security/SSI. It would save money and wake up the public. Shut down the 800#.
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