Failure to Raise U.S. Debt Cap Seen Idling 800,000 Workers

[Duct Tape]

Source: Bloomberg Business Week

The U.S. government wouldn’t be able to fund about 50 percent of its obligations and would have to furlough about 800,000 federal workers if Congress fails to approve an increase in the $14.3 trillion debt ceiling, a coalition of former budget officials says.

Sometime in the first half of August, no funding would be available for the Departments of Veterans Affairs, Education, and Housing and Urban Development, as well as unemployment insurance and Internal Revenue Service refunds, according to a report by the Bipartisan Policy Center in Washington.

“The reality would be chaotic,” Jay Powell, the author of the study and a former Treasury undersecretary under President George H.W. Bush, said at a news conference when the report was released. “Treasury would be picking winners and losers.”

The report represents a challenge to Senator Pat Toomey of Pennsylvania, Representative Michele Bachmann of Minnesota and other Republicans who dismiss the risks of a government default. Republican presidential candidate Tim Pawlenty said today Republicans should hold out for deep spending cuts before raising the debt ceiling, echoing the position of his party’s congressional leadership.

Read more: http://www.businessweek.com/news/2011-06-28/failure-to-raise-u-s-debt-cap-seen-idling-800-000-workers.html

[dorksied]

1. this is a big game of chicken.

and the republicans have always won when they play chicken. But... if Democrats can grow a pair, and grip the wheel white knuckle tight, and we go over the edge... they'll have the advantage of having the average citizen on their side. When 800,000 workers are furloughed because republicans wanted to give tax breaks to the richest people over the good of the country, it could mean the destruction of the republican party.

at least, thats my hope.

[Javaman]

7. You are too kind. it's a big game of stupid. nt

[roomfullofmirrors]

9. If the democrats swerve first on this, what's the point of voting for them instead of Republicans?

I am not afraid of the consequences- they will not hurt me but they will certainly hurt the extremely wealthy people that started this game of chicken. Obama had better not chicken out.

[lib2DaBone]

2. Does that mean they would shut down TSA? How 'bout the DEA?

[Demeter]

4. Great Idea! I'll Drink to That!

[TheMadMonk]

3. And if the cuts ARE made, a different 800k won't have departments...

...to work for.

But keep going the way you are please. The sadder the state of the US when the shit really does hit the fan, the better the chances of the rest of the world surviving the inevitable collapse.

It's that or start hanging billionaires yesterday.

[James48]

5. No money to pay soldiers, either. And no money to bring them home.

They will not be happy knowing that they are stuck in Afghanistan and Iraq for good.

[truthisfreedom]

6. Why do I get a funny feeling that the 'thugs have more to lose if it all shuts down? (nt)

[roomfullofmirrors]

10. I for one have very little left to lose. I know I'm not alone.

[Igel]

8. This is the "default."

"Default" usually means not paying interest and principle on a debt as agreed. The government, in default, could still avoid default but would have to reduce most other spending to whatever amount revenues minus debt payments comes up to.

Dedicated funding, such as FICA and Medicare (Part A)would continue to flow. Medicare Part B and D would lose significant parts of its funding. We could fund the military or a lot of other things, but not both. Oh--and we could still fund interest payments and avoid paying down principle. In other words, the US wouldn't automatically default on its public debt.

In other words, no increased debt ceiling, coupled with executive will to abide by the debt ceiing, entails keeping the budget firmly balanced on an on-going basis. (And, yes, that *would* be really, really painful.)

The US *could* default. But that would take an act of will, the actual making of a decision, on the part of the secretary of the treasury, which, no doubt, he wouldn't do without permission from the president.

[gkhouston]

11. Somebody wake me when the kabuki is over. n/t