DEAR FEDERAL WORKERS: Are You Ready To Be Forced To Work Without Any Pay?

geithner waving

We continue to do more digging into what would really happen if the debt ceiling weren’t raised, and the Treasury were forced to prioritise coupon payments over allocated discretionary spending in order to avoid default.

We found a tantalising tidbit in a Congressional Research Service report on the debt ceiling (.pdf here)

See we had assumed previously that if the Treasury found a way to prioritise debt payments over spending, then it would end up similar to a government shutdown.

But not necessarily. The report contains a specific section on the distinctions between a debt ceiling impasse and a government shutdown.

Here’s what it says:

In 1995, the Congressional Budget Office (CBO) contrasted this sort of scenario, under which the debt limit is reached and not raised, with a substantially different situation, in which the government must shut down due to lack of appropriations.

Failing to raise the debt ceiling would not bring the government to a screeching halt the way that not passing appropriations bills would. Employees would not be sent home, and checks would continue to be issued. If the Treasury was low on cash, however, there could be delays in honouring checks and disruptions in the normal flow of government services.

Alternatively stated, in a situation when the debt limit is reached and Treasury exhausts its financing alternatives, aside from ongoing cash flow, an agency may continue to obligate funds. However, Treasury may not be able to liquidate all obligations that result in federal outlays due to a shortage of cash. In contrast to this, if Congress and the President do not enact interim or full- year appropriations for an agency, the agency does not have budget authority available for obligation. If this occurs, the agency must shut down non-excepted activities, with immediate effects on government services.

There are so many permutation of how this could work out. Federal Workers should know this is a possibility.

Meanwhile, this seems bad for Obama. No pay for Federal workers would be a spending drag, but an open government wouldn’t outrage the public the way a shutdown would.

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