US Government Debt Different - Finance Department - University of ...

282The 2011 Debt Limit Impasse: Treasury’s Actions & The Counterfactual – What Might Have Happened if the National Debt Hit the Statutory Limitstatute or any other basis for concluding the Treasury is required topay outstanding obligations in the order in which they are presentedfor payment unless it chooses to do so. Treasury is free to liquidateobligations in any order it finds will best serve the interests of theUnited States.” 176 However, Treasury has maintained that it doesnot have the authority to prioritize spending obligations. 177 TheCongressional Research Service reconciles the differing opinionsof GAO and Treasury by noting that they “offer two differentinterpretations of Congress’s silence with respect to a prioritizationsystem for paying obligations.” 178The 1995-1996 impasse may act as a precedent, forcing Treasuryto follow a FIFO procedure unless Congress passes a bill providingprioritization guidelines. 179 During the 1995-1996 impasse, Treasuryadopted the interpretation of the 1985 Senate Finance Committeeand notified Congress that, absent an extension of the debt limit,176Letter from U.S. Government Accountability Office to Bob Packwood, Chairman,Committee on Finance, United States Senate (Oct. 9, 1985) (available at http://redbook.gao.gov/14/fl0065142.php). The letter, addressed to Senator Packwood states in full: “YOU HAVEREQUESTED OUR VIEWS ON WHETHER THE SECRETARY OF THE TREASURYHAS AUTHORITY TO DETERMINE THE ORDER IN WHICH OBLIGATIONS ARETO BE PAID SHOULD THE CONGRESS FAIL TO RAISE THE STATUTORY LIMITON THE PUBLIC DEBT OR WHETHER TREASURY WOULD BE FORCED TO OP-ERATE ON A FIRST IN-FIRST-OUT BASIS. BECAUSE OF YOUR NEED FOR AN IM-MEDIATE ANSWER, OUR CONCLUSIONS MUST, OF NECESSITY, BE TENTATIVE,BEING BASED ON THE LIMITED RESEARCH WE HAVE BEEN ABLE TO DO. ITIS OUR CONCLUSION THAT THE SECRETARY OF THE TREASURY DOES HAVETHE AUTHORITY TO CHOOSE THE ORDER IN WHICH TO PAY OBLIGATIONSOF THE UNITED STATES. ON A DAILY BASIS THE TREASURY DEPARTMENT RE-CEIVES A NORMAL FLOW OF REVENUES FROM TAXES AND OTHER SOURCES.AS THEY BECOME AVAILABLE IN THE OPERATING CASH BALANCE, TREASURYMAY USE THESE FUNDS TO PAY OBLIGATIONS OF THE GOVERNMENT ANDTO REISSUE EXISTING DEBT AS IT MATURES. SEE GENERALLY H.R. REPT. NO.31, 96TH CONG., 1ST SESS. 9-10 (1979). WE ARE AWARE OF NO STATUTE OR ANYOTHER BASIS FOR CONCLUDING THAT TREASURY IS REQUIRED TO PAY OUT-STANDING OBLIGATIONS IN THE ORDER IN WHICH THEY ARE PRESENTEDFOR PAYMENT UNLESS IT CHOOSES TO DO SO. TREASURY IS FREE TO LIQUI-DATE OBLIGATIONS IN ANY ORDER IT FINDS WILL BEST SERVE THE INTER-ESTS OF THE UNITED STATES. UNLESS IT IS RELEASED EARLIER OR WE HEAROTHERWISE FROM YOU, THIS LETTER WILL BE AVAILABLE FOR RELEASE TOTHE PUBLIC 30 DAYS FROM TODAY.” (emphasis added).177See Levit, supra note 171, at 7-8.178Id. at 8.179See Bruce Bartlett, How Will the Debt Limit “Game of Chicken” End?, The Fiscal Times,May 20, 2011, http://www.thefiscaltimes.com/Columns/2011/05/20/How-Will-the-Debt-Limit-Game-of-Chicken-End.