MY VIEW: Rudy Penner October 2013
As we draw ever nearer to the projected deadline for hitting the debt ceiling, Congress still has not been able to make a deal. Today, CRFB board member Rudy Penner authored an piece in CNN Money describing the folly of the debt ceiling and the possibility of a default. He compared the United States' budgeting practices to those of third world countries and criticized lawmakers for failing to resolve a self-inflicted crisis.
Penner explains that countries like Ukraine or Egypt in the past essentially did not have an option to borrow, as the marketplace refuses to buy their debt. While the U.S. does not have this problem, we are faced with lawmakers who imperil our full faith and credit because they cannot agree on a budget. Penner describes what could happen if we continue down this road and are faced with payment prioritization:
To avoid a formal default, we will likely continue to pay interest on old debt. And lacking the ability to borrow more, the Treasury Department could pay bills and make other payments only when it collected sufficient revenues from taxpayers and other sources.
The House has passed a bill that would set priorities among the government's creditors, such as ensuring that Social Security recipients get paid on time.
But the Bipartisan Policy Center has cast doubt on this strategy. It believes that it would take a very long time to reprogram government computers to make payments consistent with specific priorities.
The BPC thinks it is more practical to put bills and other required payments in a queue as they become due, then pay them when the needed funds become available.
Unfortunately, payment delays would lengthen very rapidly. Hopefully the process would remain free of political favoritism and corruption.
But as the United States starts down the road toward third-world budgeting practices, who knows what will happen next?
"My Views" are works published by members of the Committee for a Responsible Federal Budget, but they do not necessarily reflect the views of all members of the committee.