A Tea Party rally in Chicago.
(Scott Olson/GETTY IMAGES)
“It is pure baloney to say we have to pay the bills for things Congress has already approved. We are drawing the line on future spending, not the debt or obligations to Social Security, Medicare and the military, which can all be met without an immediate rise in the debt ceiling.”
--Amy Kremer, chairman of the Tea Party Express, in a statement, January 14, 2013
Kremer issued that statement after President Obama, in a news conference on Monday, argued that if Congress did not raise the debt limit, the United States would not be able to pay for services rendered in the past: “If congressional Republicans refuse to pay America’s bills on time, Social Security checks and veterans’ benefits will be delayed,” Obama said. “We might not be able to pay our troops, or honor our contracts with small business owners.”
This is an interesting question, which we explored before the last debt limit showdown in 2011. Then, we examined whether Social Security benefits could still be paid even if the debt ceiling was breached; the answer was a bit inconclusive. But after that last crisis, the Treasury Department’s inspector general provided Congress with a detailed look at the options the administration had considered for such a crisis.
Moreover, Kremer has upped the ante by saying the government could pay not only Social Security benefits but also Medicare and the military — three of the biggest parts of the budget — as well as interest payments on the debt. Let’s examine whether her claim is credible.
The Facts
This year’s debt ceiling showdown is exacerbated by the fact that February is just about the worst month in terms of government finances because relatively little money is collected while lots of bills must be paid, including income-tax refunds. Both the Treasury Department and the Congressional Research Service say that there is tremendous legal uncertainty about whether some payments could be honored while others ignored if the nation goes about the borrowing limit.
The Treasury believes that Congress has never given direction about which payments should receive priority; others (such as the Government Accountability office in 1985) have concluded there is no requirement that Treasury must pay bills in the order in which they are received.
This is a bit of an academic dispute. The sheer volume of transactions — as many as 5 million a day — would make it difficult to pick and choose. Moreover, Treasury says its systems are designed to make payments in the order in which they are due.
After the 2011 showdown, Treasury concluded that “the least harmful option available to the country at the time, of these very bad options,” was a delayed payment regime. In other words, Treasury would only pay all of the bills for a particular day once it had collected enough cash for every outstanding claim due that day.
So, in theory, Monday’s payments would be held until, say, Wednesday. Then, Tuesday’s payments would be held until enough money was collected for that day’s payments, which could be Thursday or Friday. So the government could start the following week already three days behind in payments — and continue to fall ever farther back.
Taylor Budowich, a spokesman for the Tea Party Express, defended Kremer’s statement, pointing us to a recent report by the Bipartisan Policy Center, which he said included “some options” for spending priorities.
“It is unadvisable to get into a situation where we must prioritize spending, but it is irresponsible and absolutely unacceptable to continue down a path of increased debt, increased spending, and increased taxes,” Budowich said.
We looked at the Bipartisan Policy Center report and actually found that it completely undercut Kremer’s statement. We also double-checked with Steve Bell, a co-author of the report and a former staff director of the Senate Budget Committee under Sen. Pete V. Domenici (R-N.M.). He agreed that Kremer’s statement was incorrect.
“You don’t have to be an MIT mathematician to figure this out,” Bell said. “As a matter of math, the Tea Party person is wrong.” On a given day, he said, payments for Social Security, Medicare, active-duty soldiers and interest on the debt would add up to $53 billion — while the government would have only collected $20 billion.
Bell also agreed that as a practical matter it was all but impossible for Treasury to pay a defense contractor ahead of a Social Security recipient, or vice versa.
Here’s an example of cash-flow problem as illustrated by the Bipartisan Policy Center:
The Pinocchio Test
Kremer used pretty strong language — “baloney”— to condemn Obama’s statement, but the evidence provided by the Tea Party Express actually supports the president’s point. By available evidence, it appears all but impossible for the Treasury Department to pick and choose among payments — or to keep up that balancing act up for very long.
Four Pinocchios
(About our rating scale)
Check out our candidate Pinocchio Tracker
Follow The Fact Checker on Twitter and friend us on Facebook
.
