Contrary to popular belief, the US would not default. Troops would still be paid. Medicare and Medicaid would not stop. The Bipartisan Policy Center has a nice analysis in a PDF on Debt Limit Analysis.
NO “SILVER BULLETS” TO EXTEND DATE
- Our analysis also shows that the X Date will fall between August 2 and August 9. On July 1st, Treasury publicly reaffirmed their estimate of the X Date as August 2
- The 14thAmendment does not provide a reasonable basis for challenging the constitutionality of the debt ceiling. The Administration will not attack the debt ceiling on this basis
- Treasury has no secret bag of tricks to finance government operations past August 2. Treasury will not attempt to “firesale” assets during a crisis.
- Other ideas are impractical, illegal and/or inappropriate (gold loans, IOUs)
- There is no precedent; all other debt limit impasses have been resolved without passing the X Date
- The government shutdown of 1995 –96 does not provide a precedent
Prioritization
Obama's, Geithner's, and Bernanke's statements about default simply are not credible. Nor are threats of cutoffs to military pay or Social Security. Indeed those totals allow Medicaid and Medicare to be paid.
The PDF covers alternate scenarios of what can and cannot be paid.
Interactive Map, You Decide What Not To Pay
I contend there is easily a month or more to work out a better deal. There are many programs we can easily do away with that should not be funded at all.
Please consider You choose: who gets paid (and who doesn’t)
On August 2, the federal government will not have enough cash to pay for all of its programs and obligations. The U.S. will take in a total of $172.4 billion in revenue during the month, but its total payments exceed $306 billion, resulting in a $134 billion shortfall. If a debt-limit increase is not approved, the U.S. Treasury will have to choose among 80 million monthly payments and prioritize which programs are funded and which ones are not.Mish Choices
click on chart for sharper image
As you can see, I have $30.6 billion to spare.
The first thing TO pay is interest on the national debt. It is non-payment of interest that would constitute default. Given $29 billion is easily payable, talk of default if Congress does nothing is the height of silliness.
The first thing to NOT pay should be congressional salaries.
As you can clearly see there are many things that would be a benefit to not pay, and never pay again.
Things to Not Pay and Never Pay Again
- Department of Education - $20.2 Billion
- Health and Human Services Grants - $8.1 Billion
- HUD - $6.7 Billion
- Department of Energy - $3.5 Billion
- Department of Labor - $1.3 Billion
- Small Business Administration - $0.3 Billion
- Other Spending - $52.8 Billion
Clearly those things would have to be phased out, but the total of those things is a whopping $92.9 billion. That "Other Spending" category may have some essentials, but certainly most of it is not. Also bear in mind, I have $30.6 billion to spread around as needed. Some can go to salaries, but certainly not salaries of Congress.
In contrast, please see Boehner's Credibility Gone in Revised Proposal; Boehner Tells Congress to "Get Your Ass in Line"; Best Deal Republicans Can Get? for Boehner's revised cop-out.
All things considered, especially since Boehner's credibility is gone in his latest gaseous proposal, the best thing for Congress to do would be to NOT hike the debt ceiling and work out a credible plan over the next month.
Addendum:
The link at the top has been changed.
I received an email from Michael Stubel at the Bipartisan Policy Institute thanking me for the post and sending out an updated link.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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