Jan. 18, 2013
With the way forward on the debt ceiling still murky, a Republican proposal to be unveiled next week seeks to protect payments of three groups over everyone else: bond investors, seniors and military troops.
Sen. Pat Toomey and more than 30 Senate colleagues will introduce the "Ensuring the Full Faith and Credit of the United States and Protecting America's Soldiers and Seniors Act."
The bill is meant to offer a stop-gap if Congress refuses to raise the debt ceiling and the Treasury Department thus falls short of having enough cash to pay all the government's bills in full and on time...
Practically speaking, Treasury collects enough revenue in a month to pay interest, Social Security and active military, which combined represent about a quarter of what's owed.
But bills come due every day and the revenue available to Treasury differs, sometimes radically, from day to day.
For instance, the Bipartisan Policy Center estimates that $30 billion of interest will be due on Feb. 15, but only $9 billion in revenue would be available to pay the $52 billion in legal obligations due that day.
What's more, Treasury's systems -- which process more than 80 million payments a month -- are set up to pay bills as they come due without regard to the type of payment. Interest payments, however, are processed separately.
Read the full article here.
Economic Policy Project