Could the Government Stop Paying Its Bills, Even If It Wanted To?
To the average consumer of news, the specific consequences of U.S. default are esoteric. President Obama has warned that he can't guarantee Social Security checks will go out in August, but the Treasury's inner machinations are somewhat obscure to non-financial-experts. The structure of U.S. cash flow and debt are not common knowledge. As far as government check-writing goes, however, a former Treasury official raises a disturbing possibility in an interview with Politico's Josh Gerstein and Ben White -- that U.S. disbursement bureaucracy is sufficiently byzantine that some checks simply can't stop flowing:
"With 30 million or more Social Security recipients, if you could protect them some way, you would do so, but that's going to require some very godlike distinctions between those folks and people drawing veterans' benefits and those drawing [federal employee] retirement benefits," said Gerald Murphy, a 20-year veteran of the Treasury Department who served as fiscal assistant secretary during the last major showdown over the debt ceiling in 1995 and 1996. "You probably wouldn't even be able to pay that entire population." ...
"To try and centrally stop payment or adopt a policy of paying 10 cents on the dollar, it's virtually impossible," Murphy said. "The Defense Department has [its] own disbursing offices. There is no one person who can push the button and turn it off."
Which makes the U.S. government sound like South Park's interpretation of Wal-Mart: a living entity, larger than the sum of its parts, that isn't really controlled by anyone and can't be stopped, in this case from spending money that may not exist.
Read the full story at Politico.