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Published: Wed, October 16, 2013 @ 12:01 a.m.

photo

Steven Ahrenholz, a furloughed federal worker, protests outside the Department of Health and Human Services CDC offices in Cincinnati.

SEE ALSO: On edge: House shutdown plan abrupty collapses ; now Senate

By KEVIN G. HALL

McClatchy Washington Bureau

WASHINGTON

The federal government won’t automatically or immediately default at midnight tonight if it hits the legal limit on debt without an agreement to raise it from Congress and the White House.

That’s not to say there won’t be consequences for failing to raise the so-called debt ceiling, however.

Key voices in financial markets are warning Congress and the Obama administration the consequences could be dire, especially negatively impacting the stock market.

But on the specific threat of the U.S. government defaulting on its obligations to bondholders, it wouldn’t necessarily occur immediately.

A lot depends on which of two paths the Obama administration takes should politicians lead the nation to the cliff’s edge.

The administration could try to prioritize who gets paid first in the event money runs dry, or it could decide to pay all creditors roughly 68 cents on the dollar as money comes in every day.

On Thursday, the government would have to pay its bills with whatever money is coming into government coffers on a daily basis. The Bipartisan Policy Center, a think tank with budget experts from both major political parties, thinks the U.S. government can count on about $10 billion to $15 billion a day of incoming tax revenue and other payments to the government to pay what’s owed to creditors, retirees and doctors in the Medicare system.

The most-important payment, in terms of the creditworthiness of the U.S. government, is the interest on government bonds due to investors. And it would be almost a month before a payment is due that’s so large that daily income revenues couldn’t cover what’s owed.

According to the center’s estimates, the next interest payment due after Thursday is about $6 billion, due on Oct. 31.

That would be within the range of expected daily incoming revenue. It’s not until Nov. 15 that interest payments stretch significantly above the day’s projected incoming revenue, making it impossible to make the interest payments and cover daily debts such as payroll.

On that day, the government owes interest payments of about $29 billion.

Some Republicans say the government can avoid default easily by just paying the top-priority bills such as interest on bonds plus Social Security.

There’s a catch, however. It’s not clear whether the plethora of government computer systems could prioritize who gets paid and when.

“We don’t know if they have the technical capability to do that,” said Shai Akabas, a senior policy analyst for the Bipartisan Policy Center. “Computer systems are not set up for that; it is not the modus operandi.”

Instead of paying 100 percent of some bills and zero percent of others, a Treasury Department inspector general’s report after the last debt-ceiling showdown concluded the government favored paying everyone across the board a reduced percentage based on how much it had coming in.

“You cannot pay some bills and not others and think somehow that the fact that you’re paying some bills protects you from a loss of creditworthiness,” Obama said Tuesday in a news conference.

After Thursday, incoming revenues to the federal government would cover about 68 percent of the bills. One option would be to slash spending by 32 percent, or more than $1 trillion.

Economic researcher Ed Yardeni, in a note to investors Tuesday, said that while retirees would still be paid, such cuts would hit most of the services government provides.

If the Treasury Department chose to pay bondholders at the expense of Social Security recipients and military pensioners, the rating agency Standard & Poor’s would not consider the U.S. government in default.

“Failure to pay or reduced payments on nondebt obligations, such as funds owed to government contractors or benefits recipients, would likely have negative economic impacts but would not be considered a default under our rating criteria,” John Piecuch, an S&P spokesman, told McClatchy.

That’s a point echoed by Rep. David Schweikert, R-Ariz.

“[It] doesn’t mean it’s happy and easy, but anyone that uses the word ‘default’ is being horribly disingenuous, because that means we wouldn’t pay the interest obligations we have on our bonds, and we have massive amounts of cash to cover that obligation,” he said in an interview Tuesday with a Phoenix television station.

If the government missed any bond payments because it couldn’t or wouldn’t prioritize who gets paid, it’s a different story.

“Should the government fail to service a debt obligation, we would lower the sovereign rating to ‘SD’ [selective default],” Piecuch said. “This designation indicates that the issuer, in this case the U.S. government, has failed to service one or more of its outstanding debt obligations, which include U.S. Treasury bills, notes and bonds.”


Comments

1southsidedave(4780 comments)posted 10 months, 3 weeks ago

what a mess....

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2dontbeafool(885 comments)posted 10 months, 3 weeks ago

I'm pretty sure that a bi partisan deal will be made in the senate, but congress has me worried. I think a lot of Repubs want to vote for it, but I don't think that they have the gonads to go against the Tea Party.

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3DACOUNTRYBOY(218 comments)posted 10 months, 3 weeks ago

Obamacare is all about bleeding more from the masses. Obama underestimated the responce to his plan to plunder. Those huge fines for not affording pricey healthcare would just be a form of increased taxation. So now this revolt is considered revolting?

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4UNCOMMONSENSE(360 comments)posted 10 months, 3 weeks ago

DACOUNTRYBOY, Why shouldn't people be responsible to pay for their own healthcare?? Under the current system, the real bleeders are those who do not take responsibility and cost shift to those of us who have insurance. There are many affordable healthcare plans available if you are willing to take responsibility for yourself.

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5DwightK(1251 comments)posted 10 months, 3 weeks ago

No one in congress should be voted back into office. Goodbye Tim Ryan, Bill Johnson, Sherrod Brown and Rob Portman. You guys created this mess so go live in the private sector.

Oh, and if our neighbors in the 8th district could elect someone other than John Boehner that would be great.

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6JoeFromHubbard(1029 comments)posted 10 months, 3 weeks ago

The stock market is off and running on this eve of destruction. Apparently Wall Street isn't too concerned about the proximity to the edge.

It'll be resolved and life will go on as usual with the government continuing to redistribute the wealth and spend into oblivion.

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7DACOUNTRYBOY(218 comments)posted 10 months, 3 weeks ago

UNCOMMONSENSE your healthcare costs are going up if you are working under Obamacare. Why should I be plundered of the money that I set aside for doctors visits and do without? Obamacare is a TROJAN HORSE to get more money form the mases. The welfare crowd that voted for Obama gets the best of healthcare free of any cost.

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8L0L(648 comments)posted 10 months, 3 weeks ago

How about we stop pouring out money to other countries and help ourselves first?? They're talking about cutting back on pensioners and the poor, really? Cut money back on our own people but send a boat load of it over to Africa or wherever the hell its going?

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9DwightK(1251 comments)posted 10 months, 3 weeks ago

Cutting foreign aid won't do anything. It's 1% of federal spending. To put it in perspective, Social Security is 20% and Medicare is 13%. Defense is another 22%. Interest on the debt is 5%.

Taking aid away from desperately poor people won't do a thing to help our borrowing problem.

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10JoeFromHubbard(1029 comments)posted 10 months, 3 weeks ago

@DwightK:

Your comment will resonate with most people and that is the problem we face.

The truth of the matter is that every bit of spending adds to the problem.

Reductions across the board, NO exceptions, are required.

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11Dagwood(111 comments)posted 10 months, 3 weeks ago

Would any of this crap still be going on if OBAMACARE never happened?

Get rid of this piece of garbage law that nobody wants.

99.6% of healthcare.gov visitors DID NOT enroll in Obamacare!!!!

http://www.americanthinker.com/blog/2...

Take away this law, you will save this country BILLIONS of dollars, money that can be used to pay down the deficit or better yet put back into the American Taxpayer's pocket because they won't be forced to buy something they don't want or pay for something someone else doesn't want to WORK for.

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12bunkpatrol(86 comments)posted 10 months, 3 weeks ago

I was born with a pre-existing condition.

I have watched insurance companies and the entire medical INDUSTRY deny my ailing parents into bankruptcy.

I never voted for Obama-I only vote 3rd party.

I feel very sorry for all of you and your tax/money/greed "issues" .

The Affordable Care Act is a small step in the right direction and you GOP/Tea Party Babies will be held accountable for holding this country hostage.
Just wait and see come election time you smug evil greedmongers.

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13UNCOMMONSENSE(360 comments)posted 10 months, 3 weeks ago

DACOUNTRYBOY, my healthcare costs have been increasing at double digit rates long before the Affordable Care Act took effect. I recently changed healthcare providers and the cost was very reasonable . And yes I am willing to do without in order to be responsible for my self.

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14dontbeafool(885 comments)posted 10 months, 3 weeks ago

DACOUNTRYBOY, your attitude will change once corporate greed outsources YOUR job, and you are forced to work at Taco Bell. Try buying your own health insurance then. Good point uncommon. The system we had kept increasing and increasing and the the Repubs had no sensible alternative. The problem didn't come when Obama care came, it came when the Republicans lost the election....to a black man at that. I am white, but I do believe, in my opinion, that race is a factor. Repubs claimed in week one that they would do everything possible to sabotage everything this President tried. I believe the exact quote was, "I hope this President fails".

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1576Ytown(1233 comments)posted 10 months, 3 weeks ago

bunkpatrol: Sorry you and your parents have been affected by insurance companies pre-existing condition limitations. This is a problem that is high on the list of things that are broken with our system and is something that government could have fixed without government intervention and without implementing the ACA. Possibly government subsidies for people with pre-x conditions rather than subsidies for premiums which end up as government welfare into the insurance companies pockets. Hey...I have a product that I'll sell to you for x. But now, the government will hep you pay for the product so now it cost xx. Are we ahead?

The greed you speak of is with the insurance industry and the cost of providing health care not the people who say that the ACA has it's issues. If we want affordable care, we need to look at the spiraling costs of CARE, not insurance premiums. What bankrupts people without insurance is the egregious cost of care.

"Government big enough to supply everything you need is big enough to take everything you have. The course of history shows us that as a government grows, liberty decreases." - Thomas Jefferson

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1676Ytown(1233 comments)posted 10 months, 3 weeks ago

correction: something that government could have fixed WITH government intervention and without implementing the ACA.

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17DwightK(1251 comments)posted 10 months, 3 weeks ago

The ACA is a republican idea. All it does is force people to be responsible for their own health care expenses. Romney instituted it in Massachusetts.

The biggest problem with the ACA is that it's an awful compromise and not single payer.

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18dontbeafool(885 comments)posted 10 months, 3 weeks ago

Well, medical costs has been a continuing problem over the last 10 years at least. Why hasn't it been fixed? Could it have something to do with lobbyist and the like padding the pockets of politicians NOT to do anything?

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19L0L(648 comments)posted 10 months, 3 weeks ago

@Dwight

"Taking aid away from desperately poor people won't do a thing to help our borrowing problem."

-My point is how about helping our "poor" people first and spending that money in our own country?

@Joe from Hubbard

-Thank you Joe, you obviously saw the point I was trying to make. Cut away the senseless spending across the board. The only reason I brought up the foreign aid issue is because the article spoke about cutting the aid for our own people. If they're gonna cut our own aid then they better not be sending it out of the country! And yes, we need to trim the fat across the board but like you pointed out every bit of spending adds to the problem so you gotta start somewhere.

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20DwightK(1251 comments)posted 10 months, 3 weeks ago

LOL, the poorest people in America live better than the poor in other countries. Our foreign aid dollars help win good will with individuals all across the globe and contribute to our good standing with other nations. That's a great return on 1% of our spending.

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21L0L(648 comments)posted 10 months, 3 weeks ago

Yes our "good standing" thats why we get terrosim attacks on our country for our good standing. More like we butt into other countries business. Since when did the U.S. become the "keeper" of the world? Last I checked thats what the United Nations were created for yet the U.S. still feels compelled to butt in and be the world police. Remember 911? Thats our reward for our "good standing". Ill be damned if Im gonna see our own people who need help, our own pensioners who worked hard all of their lives and who are entitles to their pension checks suffer for our "good standing". I disagree with your viewpoint on this one. Fat needs trimmed in every area of our spending, even our "good standing' spending.

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22JS(629 comments)posted 10 months, 3 weeks ago

The clueless one in the White House is doing his best to turn the workingman into a total slave who will be taxed into poverty and be jobless. Can you say third world? He however will retire with a big fat pension and unlimited free government paid healthcare. Don't ask what Obamacare can do for you but you can do for Obamacare.

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23dontbeafool(885 comments)posted 10 months, 3 weeks ago

@aol. I made that point in another article. Is Sweden in good standing with other countries? The Swiss? We border Mexico. When was the last time you heard the term "the Mexican Army"? These countries don't seem to have a problem with other countries, why do we have to interfere in every conflict? Staying out of wars will drastically cut spending as well. @ JS, all of the Rep's want to do is line their own pockets and eliminate the middle class completely. You are still one of those who are probably squawking about Obama's birth certificate.

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24bumbob(127 comments)posted 10 months, 2 weeks ago

This article is a day late and a dollar short. A bill to fund the government and raise the debt ceiling- both short term- will pass today. I think The Vindicator would do best to be a little quicker on its feet with this kind of reporting.

Anyway, the TEA Party is to blame for this entire debacle. Not the mainstream GOP or the Democrats.

So say no to false equivalence, America.

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25SeriouslyNow(192 comments)posted 10 months, 2 weeks ago

Ytown,
"something that government could have fixed without government intervention"

Could you explain that again???

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26SeriouslyNow(192 comments)posted 10 months, 2 weeks ago

Ytown,
Ok, saw your correction. I'm not sure I agree but I understand what you are saying now,

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27msweetwood(161 comments)posted 10 months, 2 weeks ago

Bum:

This story was published at 12:01 a.m., more than 12 hours before any plan was announced. Not sure how that is "a day late and a dollar short." Plus, nothing has been voted on yet so the article and its reporting still stand as a a sound report as to what could happen. Many of us will believe a plan has passed when we see it...

Mark Sweetwood
Managing Editor

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2876Ytown(1233 comments)posted 10 months, 2 weeks ago

dwight: I agree.."poorest people in America live better than the poor in other countries".

American's can't even fathom what poor means. When you live in a cardboard box with only the clothes on your back and have to walk miles for drinking water and suffer hunger..that's poor. When you earn less in one entire month than a Happy Meal at McDonald's, that's poor.

America's poor has the latest tech gadgets, name brand clothes, cars, cable tv, air conditioning, washers, dryers, microwave ovens, cell phones, big screen TVs, computers, subsidies for everything from housing, medical, utilities, food and freebies.

A generation ago, people didn't want welfare, their pride would not allow them to take food stamps or assistance, but now it is expected and the norm.

No doubt we do have people struggling in America, but we also have safety nets and when welfare benefits exceed anything we could possibly make by going out to work we perpetuate the problem.

Too bad the 1% we send in foreign aid doesn't reach the people who need it most. The conversion rate of our currency should provide 3rd world children the opportunity to live like kings and queens in their nation.

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29author50(1121 comments)posted 10 months, 2 weeks ago

Remember the good old days of just blaming Bush!

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30JoeFromHubbard(1029 comments)posted 10 months, 2 weeks ago

@ author50:

I like Bush.

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31bumslife(28 comments)posted 10 months, 2 weeks ago

I beg to differ, 76Ytown. I know firsthand what being poor is about. My handle is not a joke. I get 189/mo in foodstamps. I would gladly make more working if I could find a job - yes, I've applied to McD's and BK, etc, but they find me overqualified. there are many reasons for my current situation, most due to poor decisions on my part, but please don't make blanket generalizations like you did when it's fairly obvious that you are the one who has no clue what it's like to be poor. Try walking a half-mile in my shoes and then get back to me.

I'm not trying to personally attack you, but there are an awful lot of people in this country suffering and going to bed hungry right now thru no fault of their own, unlike me. I'd like to know what happened to the empathy and compassion our citizens used to have for those who are down and out, like back during the depression. The economy is just as bad right now as then, but the media/govt/etc put a different spin on it nowadays and the majority of hard-working americans just have no idea how bad off some people here have it.

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3276Ytown(1233 comments)posted 10 months, 2 weeks ago

bumslife, I hear you and can relate. Joblessness and despair has affected many of my friends and family throughout the years. So many different circumstances can lead to a person needing help and we should not judge.

I did not mean to sound apathetic. My post #30 was in agreement with dwight "poorest people in America live better than the poor in other countries" . What we call poor in the is country would be considered wealth in others.

People really don't want a hand out, they want a hand up. My guess is that you would probably agree that having a job and a purpose makes a person much happier than having to be dependent on others for support. But, some studies show that welfare actually pays more than work.for a single mom with kids making it hard for some to get out of that situation.

I don't see this administration creating jobs, I see us loosing jobs left and right and the changes with the ACA are not taking us in the right direction and socialism is not the answer. In Youngstown before the mills closed people worked, supported their families and felt secure in their future that someday they'd retire and that their children would also have opportunities. Our country needs to bring back manufacturing jobs. Not every person is destined for college and we can't expect entry level jobs to make us rich, but they do at least need to pay a living wage and be an improvement to welfare.

Please continue to network if you are willing to work. The opportunities sometimes come with who you know. If you are able, volunteering is a fantastic stepping stone. Good thoughts being sent your way!

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33kk80586(227 comments)posted 10 months, 1 week ago

bum- been there done that. Like you said..."most due to poor decisions on my part". That's "your part" NOT "my part. Don't get me wrong, don't mind helping out someone in a tough spot but there ARE jobs. When applying at mcdees or bk, do not put down your 3 degrees and how you were ceo at ibm for 10 years.....play it low key, don't mention any college, make up a lower position at any companies you did work at (janitor, maintenance, etc.). mcdees is not going to do a background check, not much of one anyway. Remember, it is easier to get a job if you have a job. So you work at bk and go on job interviews on your days off. Eventually you will find that job that you are not "over-qualified" for. It worked for me, it will work for you :) Who knows...start out as a burger flipper, move up to manager, then eventually.....own your own franchise!! wow, maybe I shoulda done it that way....

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34Jerryl(105 comments)posted 10 months, 1 week ago

Sound counsel there kk, when trying to establish an employee relationship begin by lying.

You might snag the job, but you'll always be in fear of being discovered and fired.

There is a good reason why employers tend not to hire over qualified.

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35kk80586(227 comments)posted 10 months, 1 week ago

fired from bk (or similar) because you have a degree or something and didn't state it on the app.?? I seriously doubt it. I doubt they'd find out unless you say something. The idea is to get a job, any job so that you not only have some income but have a stepping stone to that next (better) job... The only good reason to not hire over-qualified is because they will move on when the chance comes along....bk, mcdees, etc. KNOWS that everybody moves on when they get the chance.

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3676Ytown(1233 comments)posted 10 months, 1 week ago

Don't feel that you are overqualified. Everyone is looking to hire the best possible candidate for the position and in fast food there are many crew leader and manager positions that you may promoted to.

Talk to the manager directly. Present the qualities that they are looking for... enthusiasm, reliability, flexibility and drive. Dress conservatively, smile, shake hands. If you've had any challenges in your work or personal history, just be honest. don't volunteer the info, but be honest if they ask and tell them what you did to turn things around. They want to hire people who are willing to work and be part of the team. Read the link about McDonalds: http://fast-food.ezinemark.com/mcdona...

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37bumslife(28 comments)posted 10 months, 1 week ago

Not to change the subject or beat a dead horse, but I've had minimum-wage, low-end job prospects like BK, McDs, etc, do more in the way of background checking and drug testing than IBM, Apple, or NASA, just IMHE... in any case, I know how to emphasize skillsets to situations but do not feel comfortable with lies, even to employers - lies have contributed to some of the "bad decisions" on my part I'm living with now.

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3876Ytown(1233 comments)posted 10 months, 1 week ago

Everybody deserves a 2nd chance. Maybe a temp agency can be a stepping stone to a good job?

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