Is the federal bureaucracy ready for a debt default?
When the government was threatened by a shutdown last April, federal agencies spent weeks preparing intricate contingency plans for what would happen if the funding spigot ran dry. But now, only four days before the government could lose its ability to borrow, federal employees still have no idea what the worst-case scenario would mean for ...
When the government was threatened by a shutdown last April, federal agencies spent weeks preparing intricate contingency plans for what would happen if the funding spigot ran dry. But now, only four days before the government could lose its ability to borrow, federal employees still have no idea what the worst-case scenario would mean for them.
The Treasury Department and the Office of Management and Budget will determine which government employees, programs, and contractors will be paid in the event of a default.. As explained in this Slate article by FP alum Annie Lowrey, the federal government won’t be able to make 40 to 45 percent of its payments if it loses its ability to borrow money on Aug. 2. "The White House and Treasury have a tested playbook for a shutdown," Lowrey writes. "They do not have one for the debtpocalypse."
If the debt ceiling isn’t raised before the deadline it doesn’t necessarily mean an immediate default — but sooner rather than later, the federal government will have to stop paying a large chunk of its bills. Treasury and OMB do have some ideas about what will get funded and what won’t, but they aren’t yet sharing those details publicly.
"While only Congress has the ability to ensure the government pays all of its bills, Treasury will provide more information in the coming days as we get closer to August 2 regarding how the government would operate without new borrowing authority if Congress failed to act," OMB spokeswoman Moira Mack told The Cable.
No official guidance has been sent out from Treasury or OMB on what to do in case of a default.
The State Department hasn’t sent any guidance out to employees on how their salaries or programs might be affected next week, multiple officials told The Cable. State has been busy urging foreign governments not to panic about the debt crisis, while communicating that a debt default will probably be avoided.
"The political wrangling in Washington is intense right now. But these kinds of debates have been a constant in our political life throughout the history of our republic. And sometimes, they are messy," Secretary of State Hillary Clinton said in Hong Kong on Monday. "But this is how an open and democratic society ultimately comes together to reach the right solutions."
But as the deadline looms, officials are increasingly crossing their fingers in the hope that their projects won’t be on the Treasury and OMB chopping block.
"How do you prepare for the unthinkable?" said one State Department source. "Nobody thought it would get to this point."
The Pentagon seems to be furthest ahead in planning what it will do in case the federal government’s checks stop coming. The Pentagon’s Deputy Director for Contingency Contracting and Acquisition Policy Richard Ginman told reporters at a Defense Writers Group breakfast Wednesday that defense contractors who can’t be paid immediately will be compensated later, with interest.
Ginman said that the Pentagon, like other parts of the federal bureaucracy, won’t be able to decide what they will have to sacrifice in the case of a default. "I don’t believe that we are going to be the masters of our own destiny," he said.
Josh Rogin covers national security and foreign policy and writes the daily Web column The Cable. His column appears bi-weekly in the print edition of The Washington Post. He can be reached for comments or tips at josh.rogin@foreignpolicy.com.
Previously, Josh covered defense and foreign policy as a staff writer for Congressional Quarterly, writing extensively on Iraq, Afghanistan, Guantánamo Bay, U.S.-Asia relations, defense budgeting and appropriations, and the defense lobbying and contracting industries. Prior to that, he covered military modernization, cyber warfare, space, and missile defense for Federal Computer Week Magazine. He has also served as Pentagon Staff Reporter for the Asahi Shimbun, Japan's leading daily newspaper, in its Washington, D.C., bureau, where he reported on U.S.-Japan relations, Chinese military modernization, the North Korean nuclear crisis, and more.
A graduate of George Washington University's Elliott School of International Affairs, Josh lived in Yokohama, Japan, and studied at Tokyo's Sophia University. He speaks conversational Japanese and has reported from the region. He has also worked at the House International Relations Committee, the Embassy of Japan, and the Brookings Institution.
Josh's reporting has been featured on CNN, MSNBC, C-Span, CBS, ABC, NPR, WTOP, and several other outlets. He was a 2008-2009 National Press Foundation's Paul Miller Washington Reporting Fellow, 2009 military reporting fellow with the Knight Center for Specialized Journalism and the 2011 recipient of the InterAction Award for Excellence in International Reporting. He hails from Philadelphia and lives in Washington, D.C. Twitter: @joshrogin
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