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

Jeremy Kreisberg & Kelley O’Mara (Under the Supervision of Professor Howell Jackson)President Obama seemed to deny plans to prioritize, saying that hecould not “guarantee” that Social Security checks would go out if thecountry hit the statutory debt limit. 192 On July 27, 2011, a New YorkTimes article cited Treasury officials’ repeated statements that theydid not have “the legal authority to pay bills based on political, moralor economic considerations,” and suggested that these statementsimply that “the government will need to pay bills in the order thatthey come due.” 193285The FIFO approach would not only have been a legally permissibleexplanation, 194 but also may have been more politically expedientfor the Executive Branch than making difficult choices about whichpayable accounts should “win” and “lose” in a unilateral prioritizationscheme. Such decisions with limited resources would upset variouspolitical constituencies. Further, adherence to a FIFO approach mayhave served to apply pressure to Congressional Republicans. As onecommentator observed, certain members of Congress may have beenmore likely to negotiate in the face of “soldiers going without pay.” 195Lastly, it can be argued that a default FIFO prioritization schememay have been more practical 196 than comprehensively prioritizing80 million payments per month. 197 Despite superficial plausibility,however, a FIFO payment scheme is not without complexity, sinceTreasury does not control 100% of payments. 198192Politifact, Barack Obama said Social Security and other federal checks may not go out on Aug. 3if the debt ceiling is not increased, Tampa Bay Times, July 12, 2011, http://www.politifact.com/truth-o-meter/statements/2011/jul/13/barack-obama/barack-obama-said-social-security-andother-federa/.193Binyamin Applebaum, Treasury to Weigh Which Bills to Pay, N.Y. Times, July 27, 2011,http://www.nytimes.com/2011/07/28/business/economy/treasury-to-weigh-which-bills-topay.html?_r=1.194See Senate Report, supra note 172.195Felix Salmon, Can Treasury Prioritize Bond Payments?, Reuters, July 29, 2011, http://blogs.reuters.com/felix-salmon/2011/07/29/can-treasury-prioritize-bond-payments/.196Jay Powell, How Will the Federal Government Decide Who Gets Paid after August 2?, Bi-Partisan Policy Center (July 25, 2011) (available at http://www.bipartisanpolicy.org/blog/2011/07/how-will-federal-government-decide-who-gets-paid-after-august-2).197Jerome Powell, Real Implications of Debt Debate, Politico, June 29, 2011, http://www.politico.com/news/stories/0611/58026.html.198Ease of FIFO method should not be assumed, as Treasury’s Financial Management Serviceonly disburses 85% of government payments. See Financial Management Service, Fact Sheet:Payment Management (available at http://www.fms.treas.gov/news/factsheets/pmt_mgmt.html). The Department of Defense, the Postal Service and other independent agencies disbursethe remaining sum. Coordinating receipt of bills among the various agencies for a FIFOdisbursement of moneys may have presented significant difficulties.