There is no clear roadmap for agencies or federal employees to follow if Uncle Sam cannot pay his bills, making the situation much less predictable than a government shutdown. "A lapse [in appropriations] is an easier thing in a sense because the law is pretty clear," said John Palguta, vice president for policy at the nonprofit Partnership for Public Service. "We know how to do that, and agencies were deep into the planning when we came to the brink of the last shutdown."
The ramifications of a government default on agencies and employees, however, might not be obvious in the short term. As long as there is money in the coffers, government operations will continue, but once funds start to dry up, the Obama administration will have to choose which employees and which services to continue paying -- politically painful decisions.
"Federal employees may continue to work and agencies, to a considerable degree, may continue to provide services, but the Treasury may not have sufficient cash to make payments to employees, contractors, vendors and others with whom it does business," said a July 14 policy paper from the Committee for a Responsible Federal Budget. A range of benefits, including the salaries and retirement benefits of federal employees, at some point could be discontinued or limited, according to the report.
More than 100 federal employees told Government Executive that they have not received any guidance or communication from their agencies on how to manage during a default or the potential effect it could have on their pay and benefits. "Here at Social Security, the only information we hear is from beneficiaries calling about their August benefits," said one federal employee. "I think it is a lot more likely that we won't get our checks than the public not getting theirs."
SSA sent a July 14 memo to employees with instructions on how to handle inquiries from the public about their benefits if the debt ceiling is not raised. "If an individual inquires about payment of Social Security or SSI checks due to concerns about the federal debt ceiling, provide the following response: 'We're sorry but we don't know,' " the memo stated.
In the months and weeks leading up to the near government shutdown, many agencies quietly prepared guidance but purposely waited until the last minute to distribute information to employees. In the current scenario, the lack of communication is largely because there's no precedent, not a result of a deliberate withholding of information, observers said. The Office of Personnel Management and the Office of Management and Budget did not say whether they planned to distribute any guidance to employees on the consequences of a default. "It's a mess from a management point of view because it's really hard to prepare," Palguta said.
The Federal-Postal Coalition on Friday sent a letter to OMB Director Jack Lew and Treasury Secretary Timothy Geithner saying the debt ceiling debate "is generating significant concern throughout the federal community over its impact on the continuity of government operations." The group, made up of several federal employee organizations, asked administration officials to provide information on continuity of government plans, possible furloughs and the effects on workers' pay and benefits if a default occurs.
In a Jan. 6 letter to Senate Majority Leader Harry Reid, D-Nev., Geithner listed the services and benefits that a default would adversely affect, including:
- Military pay and retirement benefits
- Federal civil service salaries and retirement benefits
- Veterans' benefits
- Social Security and Medicare benefits
- Payments to defense contractors
In a report published in June, 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, Geithner could prioritize spending to include reductions in pay for government workers, the group said. Yet the effects of a government shutdown would be more immediate and would likely affect a greater portion of the federal workforce, according to a report from the Congressional Research Service released earlier this year.
"Failing to raise the debt ceiling would not bring the government to a screeching halt the way that not passing appropriations bills would," said the CRS report, quoting a 1995 report from the Congressional Budget Office. "Employees would not be sent home and checks would continue to be issued."