If Debt Ceiling Doesn't Get Raised. How do they decide who doesn't get paid?

Are there actual rules about who doesn’t paid if the debt ceiling doesn’t get raised? When they talk about not paying social security checks, that doesn’t strike me as the first choice that would come to my mind.

[li]Frankly the first people that come to mind would be Congress. [/li][li]Government employees GS15 and above. That would include the SES, the federal judiciary and a lot of the congressional and presidental staff.[/li][li]Pakistan[/li][li]Ethanol and all agricultural subsidies.[/li][/ol]

If there are rules, then what would the consequences if President Obama ignored them and made his own list.

Feel free to move this topic to another group if there isn’t a factual answer to the question.

No need to worry, absolutely no billionaires will be harmed.
They will continue to get whatever the government can give them.

All of the things you quoted make up a tiny fraction of the budget. In terms of the scale of the problem, money going to Congress, other government employees and Pakistan is inconsequential.

The deficit in August is projected to be about 33% of expenditures, IIRC. So which third of that pie chart would you like to slice out?

Plus some

Oh please. The government does not give money to billionaires. At best, it chooses to take less from them.

  1. Anyone who opposed the Debt Ceiling Raise and their pet projects.

Interesting question and frankly one I do not think there is a GQ answer to since it has never happened before.

Congress produces budgets (constitutionally they hold the purse strings). The president must abide by the budget that is passed. If congress says we buy a million widgets and a million gizmos for $1000 each then that is what happens.

If there is no ability to raise money though (by issuing debt) then the president is in an impossible position. He is legally obligated to buy the widgets and gizmos. However, he can’t. There is no money for it.

It is a constitutional crisis (among other problems).

My guess is unless congress passes some new spending priorities real, real fast it has to be up to the president to decide what gets bought and what doesn’t.

This flies in the face of the constitution but then the president is being asked to do impossible things. Something has to give and someone has to make the decisions.

Lacking clear guidance from congress leaves only the president to make the choices. He is essentially given huge power (maybe not “given” but by default).

The only other route is the courts and I cannot see how they could make the decisions not to mention make them in anything like a quick timeframe given their usual glacial pace. Immediate decisions would have to be made.

The only other alternative is to say the president can’t make those decisions so absolutely no one gets paid. The country literally stops writing checks completely. That route is utterly disastrous though. The world economy would collapse overnight. No president will let that happen (at least I cannot imagine them doing so).

Unless they own or work for government contractors. Erik Prince is worth $2.4 billion, for example.

If the debt ceiling doesn’t get raised, arguing about who gets paid will be the last of our worries.

The Day the US Defaulted on Treasury Bills

The debt ceiling will be raised. There is simply no other choice, and those in Congress know it.

This will not work. Unless Congress passes spending priorities and immediately raises taxes (and immediately collects them) to implement those priorities, it would have to borrow money to implement those same priorities, and that ability stops on August 2nd. Even the normal process to implement programs takes weeks to months. It’s too little, too late.

The sad reality is the game is over. It’s sad because people don’t just get it. There are no more cards to deal. Any plan, any process, other than voting to raise the debt ceiling as the single priority, takes time to implement. Since May, when the debt ceiling was actually reached, Treasury has been shuffling accounts and budgets to keep the government operating. That ability reaches a brick wall on August 2nd.

As a federal employee my mandatory deductions for my retirement have not been going into my various retirement accounts. The amounts are being credited in the ledger but the actual money isn’t going there. As part of the Treasury accounts shuffle, fed retirements funds are paying to keep the government operating. If and when the debt ceiling is raised, selected obligations that are keeping the government operating (borrowing from fed employees retirement accounts is just one example) must be paid back first. Once those obligations are met, second tier obligations must be paid. Then third tier, and so on.

The hard part is determining which accounts belong to which tier, as required by law. Key point. As required by law. Some accounts may be of equal tier and priority.

FWIW, make the pain hit the most people to convince the idiots in Congress playing games. Shut down the FAA, TSA, and USDA food inspection programs if no debt ceiling raise. Watch how has the bill then passes.

Should read …

FWIW, make the pain hit the most people to convince the idiots in Congress to quit playing games. Shut down the FAA, TSA, and USDA food inspection programs if no debt ceiling raise. Watch how fast the bill then passes.

I did not know that.

Well, I knew the Treasury was playing accounting games but never considered or understood the mechanics of it all.

I am more scared now than I was so thanks for that. :wink:

Related note. When the current fiscal year budget cycle was not finished, many federal agencies were operating under a CR (continuing resolution). There are other threads that explained that problem a few months back. Had Congress not passed a new CR or the actual budget, real government programs would have shut down. The process to shut down government was well into the game (including furloughing affected fed employees) when at the literal eleventh hour, Congress pulled its collective thumb out of its ass and actually passed the budget (which expires this 30 September 2011 at the end of this fiscal year.)

But I digress.

The point is, this time with a debt ceiling critical mass approaching (on a scale far worse than not passing a CR or and actual annual budget), fed employees are in the dark. The rumor mill is running rampant. We’ve received no preliminary information on anything. No directions on, “Prepare for possible furloughs,” or “what are the program priorities that must continue,” or “we’re drawing up essential personnel lists,” etc. Nothing. Nada. Zip.

This single lack of no information, not even rumors from unauthorized people who can’t speak on the record, really is a significant telling point. IMHO, it means the very top levels of government are running the greatest bluff game ever (knowing the debt ceiling will be raised by the deadline) and/or the current administration is holding emergency plans tightly to the vest like never before. That the zero hour occurs during a business week, and not on a Friday or a weekend, may indicate we will probably receive those plans within hours of possible implementation.

I’ve asked folks at work more knowledgeable than me on budget matters and this is their collective view:

[li]We may have an operating budget to continue operating past August 2nd, but the actual funds could be diverted to pay for essential services (military, border patrol, FAA, etc.). So even if we have a budget, we may not have the money. We shut down.[/li][li]We may have a budget that pays our salaries and isn’t diverted, but the programs we manage come from different accounts that are diverted. So we might show up at work but are not allowed to perform any work. We don’t shut down.[/li][li]We receive last-minute instructions to shut down. Last minute as in eleventh hour plus 45 minutes to immediately cease all government operations, turn off all computers, leave the building, go home and watch the news. If this happens, this is equivalent to seeing the micro-second brilliant flash just over the horizon and there is nothing the average person can do anything about it.[/li][/ul]
All of this not knowing, scaremongering being played up in the news (and here), could all be for naught because the issue will be resolved in time. The final point should be obvious. Are there things average folks should be doing now to prepare in a worst case scenario? Yes. If you are prepared and disaster is averted, no harm done. OTOH, if you believe all will be right in the world, nothing to worry about, no prepations needed, and the worst happens, what are you going to do then?

The government is getting revenue daily, so they can fund part of the government, at least, without borrowing. This analysis, by the Bipartisan Policy Center, might be useful.


Yes they can continue to pay some bills.

Who decides which bills get paid and which don’t?

So, what should I be doing? Getting cash on hand? Buying lots whatever consumables I use?

Who knows? It’s never come up before. I think the assumption is that it would be the Treasury/President, but your idea is as good as anyone else’s.

There’s no rules. And it’s never happened before so there’s no precedent. It would be a case of the President and the Treasury Secretary sitting down and saying, “right, Congress hasn’t given us enough money to pay everyone Congress has told us to pay, so we have to choose. Who gets paid and who doesn’t?” It would be a nightmare decision.

They would almost certainly prioritize interest payments to creditors on US bonds, because if they failed to pay those it would constitute a formal default and would instantly result in the US credit rating being downgraded to near-junk, sending interest rates skyrocketing and costing even more money (plus there’s 14th amendment issues over whether he’d be allowed to deliberately default on bonds). But after that, who knows? We’d be talking about cutting out roughly 40% of government payments, so all of the ones you mentioned - Congress and presidential staff salaries, aid to Pakistan, ethanol subsidies - are nowhere near money level we’re talking about. We’d be talking about social security checks not going out; the entire military not getting paid; entire government agencies like the FBI shutting down; most federal workers going unpaid; that sort of thing. It would be serious hardship and it would rock the economy, possibly causing a recession.

Here’s an article I’ve posted before outlining some of the options they’d be considering. Bear in mind I don’t think there’s any chance it’s going to happen. Democrats have been foursquare behind raising the debt ceiling from the start; it’s only the Republicans who have been threatening not to raise it, and they’re so heavily funded and influenced by Wall Street and the financial sector (both parties are, in fact), who stand to really suffer if it doesn’t get raised, that there’s no chance they’ll fail to raise the debt ceiling. Everything in the meantime is just the political jockeying.

Since Social Security is (theoretically) a separate, allegedly self-sustaining fund, with plenty of money (for now), why would those cheques need to stop going out? The only reason it would not have enough money/cash flow would maybe be if the government did not pay the interest on the T-Bills held by the fund. Would the bond rating agencies care if the government chose to skip payments on certain bonds held by an arm of the government?

As money still flows in from SS witholding deductions, could the government even legally divert that cash to somewhere else? What is the status of government monies collected for a specific purpose? Can they legally be redirected to more urgent obligations?

Social Security pays out more than it takes in.

Yes, the SS fund in theory has a lot of money in a pile it can draw down from.

However, the government has long since emptied the SS coffers and in their place left a big pile of IOUs.

If the government does not make good on paying back those IOUs then SS cannot afford to pay all its obligations.