Practical Dad

Debt Ceiling and Default:  Who’s Paid First

This isn't the type of website that tracks closely to the news, but this reported leak by the Administration bears notice. 

A recent post was about some commentary that I'm hearing from people to the effect that a federal default might not be such a terrible thing and one of my own observations was that come the early August period, there would still be money to pay some bills.  The government would then be in the position of more than a few average Americans, who have to prioritize their bills and decide what gets paid first.  One of my great interests would be who gets paid with the available funds and who gets stiffed.

Bloomberg is now running a report by an unnamed Administration official that if the debt ceiling is not raised, then the Treasury Department would assure that the bondholders - frequently foreign creditors and the banking system via the Federal Reserve System - would receive payment ahead of others.  Honestly, I'm not certain whether there's legislation that mandates that bond payments supersede other payments but the simple reality is that the US government will give precedence to creditors who own US bonds which mature during that period.  Frankly, it doesn't matter even if such legislation exists because the government should never have reached this ridiculous state of affairs.  This might simply be a leak to ratchet up pressure upon the Congress, whose members will hopefully fear that the public will blame them for all manner of missed benefits.  But it points out two salient things:

  • The administration refused as recently as a month ago to specify any order of payments, which they apparently now think makes a major difference in whether some compromise - meaningful or not - is reached.
  • The US government has officially placed the American people on notice that bondholders and creditors will be given priority over the citizenry. 

So there it is.  If you want the government to give a damn, make sure that you lend them some money beyond your taxes.

Comments

Leave a comment (email addresses will be kept private!)

Name:

Email:

URL:

ARTICLES BY CATEGORY

Basics for Dads

Child Development

Child Health

Child Safety

College

Commentary

Communication

Dad and Mom

Discipline

Economics

Family / Personal Economics

Family Management

Father Lessons

Housework

Humor

PracticalDad Solutions

School

Youth Culture

Basics for Dads Child Development Child Health Child Safety College Commentary Communication Dad and Mom Discipline Economics Family / Personal Economics Family Management Father Lessons Housework Humor PracticalDad Solutions School Youth Culture