Debt ceiling debate threatens federal pay and benefits

Treasury Secretary Geithner would allocate limited funds if the debt limit isn't raised. Treasury Secretary Geithner would allocate limited funds if the debt limit isn't raised. Newscom
Failure to raise the government's debt ceiling could lead to cuts in pay and benefits for federal civilian employees, military members and veterans, according to a new analysis.

In a report published Tuesday, the Bipartisan Policy Center found that unless the debt ceiling is raised, federal spending would be cut by 44 percent in August. Under several scenarios, Treasury Secretary Timothy Geithner could prioritize spending to include reductions in pay for government workers, the group said.

"Our analysis shows that the government will be unable to pay all of its bills on Aug. 3 or sometime soon thereafter," said Jay Powell, visiting scholar at BPC and former undersecretary of the Treasury for finance. "The choices would not be pretty."

According to BPC, Treasury could exhaust its cash flow in August paying only for interest on existing debt, Medicare, Medicaid, Social Security, unemployment insurance and defense contracts. Unless these programs were cut, departments such as the Justice, Labor and Commerce could go unfunded, as could veterans' benefits, military pay and federal civilian compensation, the report found.

The group also said that if a cash shortage began on Aug. 3, the government would be unable to pay out $23 billion in Social Security benefits due that day.

Carl Goldman, executive director of the American Federation of State, County and Municipal Employees Council 26, said the scenarios laid out in the report all threaten federal salaries.

"What the study says is that trying to decide who are the winners and losers is a very, very difficult and very, very unfair process," he said. "If there is a default, there is a very good chance that federal employees won't get paid."

A February report from the Congressional Research Service found that the debt ceiling carries little risk for federal workers, however. "Failing to raise the debt ceiling would not bring the government to a screeching halt the way that not passing appropriations bills would," CRS wrote, quoting a 1995 report from the Congressional Budget Office. "Employees would not be sent home, and checks would continue to be issued."

Correction: The original version had a wrong word in Carl Goldman's organization. He is executive director of the American Federation of State, County and Municipal Employees Council 26.

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
FROM OUR SPONSORS
JOIN THE DISCUSSION
Close [ x ] More from GovExec
 
 

Thank you for subscribing to newsletters from GovExec.com.
We think these reports might interest you:

  • Forecasting Cloud's Future

    Conversations with Federal, State, and Local Technology Leaders on Cloud-Driven Digital Transformation

    Download
  • The Big Data Campaign Trail

    With everyone so focused on security following recent breaches at federal, state and local government and education institutions, there has been little emphasis on the need for better operations. This report breaks down some of the biggest operational challenges in IT management and provides insight into how agencies and leaders can successfully solve some of the biggest lingering government IT issues.

    Download
  • Communicating Innovation in Federal Government

    Federal Government spending on ‘obsolete technology’ continues to increase. Supporting the twin pillars of improved digital service delivery for citizens on the one hand, and the increasingly optimized and flexible working practices for federal employees on the other, are neither easy nor inexpensive tasks. This whitepaper explores how federal agencies can leverage the value of existing agency technology assets while offering IT leaders the ability to implement the kind of employee productivity, citizen service improvements and security demanded by federal oversight.

    Download
  • IT Transformation Trends: Flash Storage as a Strategic IT Asset

    MIT Technology Review: Flash Storage As a Strategic IT Asset For the first time in decades, IT leaders now consider all-flash storage as a strategic IT asset. IT has become a new operating model that enables self-service with high performance, density and resiliency. It also offers the self-service agility of the public cloud combined with the security, performance, and cost-effectiveness of a private cloud. Download this MIT Technology Review paper to learn more about how all-flash storage is transforming the data center.

    Download
  • Ongoing Efforts in Veterans Health Care Modernization

    This report discusses the current state of veterans health care

    Download

When you download a report, your information may be shared with the underwriters of that document.