President Barack Obama's blanket statement Monday that "Social Security checks and veterans benefits will be delayed" if Congress doesn't raise the debt limit masked the options open to the government if it is forced to operate in a severe fiscal pinch. There are many, although none pleasant. If Washington can't keep borrowing to ensure all its bills are paid, it will need to decide which expenses to cover and which might have to slide until a deal comes together.
It's possible, but not preordained, that Social Security recipients, veterans and beneficiaries of other cherished programs would take a hit. The administration has choices in how to spread the pain.
Highlighting a threat to the most popular products of the government is a time-honored Washington tactic for turning up the heat on the other side to negotiate and settle.
Few may care, or even know, if spending is slashed on the multitudes of private contractors who do work for the government, one likely consequence if the government runs out of borrowing room. But Obama knows lawmakers will get an earful from constituents if Social Security checks are late.
The political predilection for hyperventilated worst-case scenarios was dubbed the Firemen First principle in 1989 by Charles Peters of The Washington Monthly, and is known in other quarters as the Washington Monument ploy. It's the threat that a budget cut will force firemen and police to be laid off, or the iconic monument to be shut, when in fact there are other ways to save money. (It so happens the monument is closed, but for earthquake repair.)
Before a last-minute deal averted what would have been the nation's first-ever default in 2011, it was widely expected that the government would continue making its debt payments and honor its obligations to Social Security and Medicare recipients, while deeply cutting spending on non-essential federal workers and state and local governments, as well as contractors, in the early going.
The Treasury Department never disclosed what contingency plan it would have put into effect if the government had been forced to decide which of its 80 million monthly payments to continue making and at what pace.
The Bipartisan Policy Center, a Washington-based research group, ran several scenarios. In one, it calculated that the government could make its debt payments and maintain key spending on social programs and entitlements, defense programs and federal pay and pensions—if it held back income tax refunds to everyone and slashed money for road construction, air traffic control, flood insurance and much more.
Treasury's inspector general reported after the crisis passed that officials had contemplated delaying payments of all kinds because "there is no fair or sensible way to pick and choose among the many bills that come due every day."
Under that circumstance, the government would have paid out day to day only what came in as revenue, leaving everyone short and racking up the IOUs at an alarming rate.
This delayed payment regime, said Inspector General Eric M. Thorson, was considered "the least harmful option available to the country at the time, of these very bad options." But the government didn't settle on a plan and, as it turned out, didn't have to.
What's close to certain—now as then—is that the government would pull out all the stops to ensure debt payments continue. That's because its credit rating, which shapes the cost of borrowing, is on the line, as is America's wider reputation.
At his White House news conference Monday, Obama laid out a variety of potential consequences if no deal is reached in time.
"We might not be able to pay our troops, or honor our contracts with small business owners," he said. "Food inspectors, air traffic controllers, specialists who track down loose nuclear materials wouldn't get their paychecks." And more that might or might not occur.
But benefits for retirees and veterans, as he told it, were sure to lag "if congressional Republicans refuse to pay America's bills on time."
If that happens, though, it will be partly his call too.
Associated Press writers Jim Kuhnhenn and Martin Crutsinger contributed to this report.