Will the US default on October 17th 2013?

[Torie]

There is zero chance of a default. Debt obligations will be paid first (something like 6%-7% of the budget or something at the moment). There is a lot of hyperbole going out there regarding this shut down business. Not that slashing government spending by 25% or whatever would not have a severe economic impact. But there will be no default.

[Torie]

Even if the debt ceiling is not raised, if by "default" one means defaulting on treasury debt service, that will not happen. Government spending will need to be slashed by 20%, or whatever the cash short fall amount is, but out of the 80% of cash available, debt service will certainly be paid. So there is zero chance given that definition of default. (Grumps this is the proper quote from me for you to save. The other is just the Reader's Digest version of what I meant.)

[Torie]

Even if the debt ceiling is not raised, if by "default" one means defaulting on treasury debt service, that will not happen. Government spending will need to be slashed by 20%, or whatever the cash short fall amount is, but out of the 80% of cash available, debt service will certainly be paid. So there is zero chance given that definition of default. (Grumps this is the proper quote from me for you to save. The other is just the Reader's Digest version of what I meant.)

Why doesn't Fox News simply watch MSNBC if they want to get a good source of accurate news?  I keep seeing these statements posted on the web and I wonder why people don't just watch MSNBC news where it was explained quite clearly that the Treasury computer system simply is not set up to pick and choose what to pay.  I know it is fun for Republicans to trot out simplistic and inaccurate analogies comparing the federal government to a household but it isn't a household.  It is a complex multitrillion dollar global institution that is responsible for taking care of 330 million people both at home and abroad.

Do people simply not have any concept of the number, nature, and variety of checks that go out?  For a party that claims to love efficiency and certainty for big business they really do propose some really complex inefficient ideas that dramatically increase uncertainty.

Ah yes, MSNBC. Trust me, folks will figure out how to cut off certain checks on autopay, and not others.

[Torie]

Trust me, folks will figure out how to cut off certain checks on autopay, and not others.

Why do you keep parroting this as if it somehow makes not raising the Debt Limit "okay"? The spin is becoming unbearable.

You don't read my posts closely, or even loosely, apparently.

[Torie]

Yeah, that's the problem with the "prioritizing" argument.  It's not the technical issues, its that the Treasury doesn't have the legal authority to spend less than Congress requisitioned on everything that Congress requisitioned.  Jack Lew (or Barack Obama!) doesn't have the legal authority to say "stop paying Social Security before you pay interest payments on the debt."  The idea that we can reprioritize debt payment without a Congressional bill authorizing the Treasury to do so is simply illegal (unconstitutional is more like it, as it's a direct violation of Congress' power of the purse).

You can't spend what you don't have, so you have to prioritize. You can't follow a law that is impossible to follow. In all events, of course the Pubs would pass legislation authorizing debt service payments as a priority or whatever, which Obama would no doubt veto, to prevent himself from having that technical legal authority.  It's all games.

But Bedstuy is right that there are risks in failing to pay other stuff, and the uncertainty, and a potential failing of confidence of the financial markets, so just because the debt service is paid, doesn't mean that there are not potential severe negative consequences. There just won't be a panic because debt service obligations are not met. In the end, Obama will pay the debt service no matter what the spin is now. Hopefully we will not have to find out if I am right, but I am confident that I am right.

[Torie]

I never said that at all, but printing more money as it were could conceivably be part of the mix, at least short term. What I said, is that of course the cash available will be prioritized. Obama himself just said that his administration is "exploring all contingencies" if Congress fails to meet the deadline. "So obviously, you know, worst-case scenario, there are things that we will try to do — but I will repeat, I don't think any option is good." (emphasis added)

And despite all the assertions to the contrary, has the Administration said it is impossible for whatever reason to pay the debt service with the available cash, and they won't, and thus there will be a treasury debt default? No. And if it literally cannot do it for whatever reason (as opposed to just refusing to do it even though they can), the Administration is being reckless in not saying so now, and why, and what needs to be done to change that. But I don't believe that for a moment.

[Torie]

If we define "default" as failing to pay all government bills as they come due even though the debt service portion of them are paid, then obviously that is a true statement. It is all in the definition of the word - the capture the moniker game. But typically, the word "default" is used out there in the spin world in the same sentence as defaulting on government debt.