Before a last-minute deal averted what would have been the nation's first-ever default in 2011, it was widely expected that the government would continue making its debt payments and honor its obligations to Social Security and Medicare recipients, while deeply cutting spending on non-essential federal workers and state and local governments, as well as contractors, in the early going.
The Treasury Department never disclosed what contingency plan it would have put into effect if the government had been forced to decide which of its 80 million monthly payments to continue making and at what pace.
The Bipartisan Policy Center, a Washington-based research group, ran several scenarios. In one, it calculated that the government could make its debt payments and maintain key spending on social programs and entitlements, defense programs and federal pay and pensions â¿¿ if it held back income tax refunds to everyone and slashed money for road construction, air traffic control, flood insurance and much more.
Treasury's inspector general reported after the crisis passed that officials had contemplated delaying payments of all kinds because "there is no fair or sensible way to pick and choose among the many bills that come due every day."Under that circumstance, the government would have paid out day to day only what came in as revenue, leaving everyone short and racking up the IOUs at an alarming rate. This delayed payment regime, said Inspector General Eric M. Thorson, was considered "the least harmful option available to the country at the time, of these very bad options." But the government didn't settle on a plan and, as it turned out, didn't have to. What's close to certain â¿¿ now as then â¿¿ is that the government would pull out all the stops to ensure debt payments continue. That's because its credit rating, which shapes the cost of borrowing, is on the line, as is America's wider reputation.