As the partial government shutdown wears on in Washington, D.C., another potential standoff is right around the corner — this time it’s the $16.699 trillion debt ceiling.
Treasury officials claim that come Oct. 17, the government will be unable to make payments on time and in full on the national debt, triggering the first default in U.S. history.
Of course, there’s enough revenue to pay interest owed on the debt, and Treasury can refinance existing debt up to the limit—there just would not be enough money to pay for everything else.
The White House’s argument is that the government legally has no authority to prioritize payments on the debt, according to a recent Inspector General’s report on the Aug. 2011 debt ceiling debacle.
“While Congress enacted these expenditures, it did not prioritize them, nor did it direct the President or the Treasury to pay some expenses and not pay others,” the report states. “As a result, Treasury officials determined that there is no fair or sensible way to pick and choose among the many bills that come due every day.”
There is only one problem. The Treasury does have the authority to prioritize payments, a then-Government Accounting Office (GAO) report from 1985 found when the same question came up during the Reagan Administration.
Back then, the GAO found that “The Secretary of the Treasury does have the authority to choose the order in which to pay obligations of the United States.” And, to wit, “Treasury is free to liquidate obligations in any order it finds will best serve the interests of the United States.”
In addition, Section 321 of title 31 of the U.S. code states, “The Secretary of the Treasury shall prepare plans for improving and managing receipts of the United States Government and managing the public debt.”
“Managing the public debt” can only be construed to include the authority to manage and ensure that the payment principal and interest of the federal debt is made on time and in full based on whatever revenue is available to the Treasury. Yet, the trouble is that it is not mandatory that he do so.
This means Secretary of Treasury Jack Lew has complete discretion to prioritize payments to our creditors — or not — should the debt ceiling is reached.
(To continue reading this piece, press the “Read More …” icon below).
Robert Romano is the Senior Editor of Americans for Limited Government.
7 comments
Oh, well then, please proceed!
As if a prioritized default would be just fine. Or is there another point Romano is trying to make?
No no no, a default won’t really cause any problems! That’s just tin foil hattery! None of it matters! And if it does, well, we’ll just blame Democrats!
The tin foil hattery is thinking that all this political drama would ever amount to a traditional “default” in the context of gov’t not paying its bills, even in the context of a debt ceiling.
They will print money to the bitter end….none of the pols have the stomach for let alone want an actual traditional default-it’s not even a partisan issue in the big picture.
It’s “the sky is falling” nonsense.
In other words, “Hey, Republicans, we forced a shutdown, why not a default too? We need more hostages. Let’s go for the entire country this time!” Wonderful, ALG lives up to its name. What better way to make “limited” government than to tie it down in hostage negotiations?
Their friends at the Cato Institute are already trying to flat out lie about Obamacare coverage, too, just in case people start thinking that maybe a sane rationality towards health care reform might be a good thing.
http://www.mediaite.com/online/shock-and-awful-conservatives-already-lying-about-obamacare-enrollee-chad-henderson/
If you can’t see that both side are to blame I can only come to one conclusion, partisan sheeple with their heads stuck where the sun don’t shine.
I read a Q&A from my brokerage frim and they claim there is 30 billion for Lew to spend after Oct 17. By Nov 1, that’s when the SS checks don’t go out, medicare payments held up etc…
Defaulting is the same thing as shooting yourself in the head. 2008 might look like good times compared to a debt default.
USSA is bankrupt … however, print funny-money until it is worthless.