The Washington Post
Jan. 14, 2013
Unless Congress intervenes, the U.S. government will smash up against the debt ceiling some time around late February. At that point, the government will only have enough tax revenue to pay about 60 percent of its bills — and it won’t be able to borrow more money to make up the difference. So what happens then?...
In theory, Treasury might be able to prioritize bond payments above all else, says Steve Bell of the Bipartisan Policy Center. The computer system that handles U.S. sovereign debt, Fedwire, is technically separate from the system overseeing payments to agencies and other vendors. Yet it’s unclear whether Treasury has the legal authority to prioritize in this way — the agency has never dealt with this situation before. “Anyone who says they know whether this is legal is not telling the truth,” says Bell.
And that still leaves a slew of domestic obligations to deal with. Some commentators have suggested the government could keep sending out Social Security checks while delaying payments to, say, defense contractors. But, says Bell, it would be difficult to reconfigure Treasury’s computers to do this in short order. The agency’s inspector general agrees: “Because Congress has never provided guidance to the contrary, Treasury’s systems are designed to make each payment in the order it comes due.”