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Beware False Preaching About Debt Ceiling

3. The order of payments can indeed be determined. Contrary to what some are saying, the federal government can control who gets paid. The Federal Reserve has said that it cant prioritize the checks it clears when theyre submitted for payment, and that has led some to believe that theres no way to put one payee ahead of another. But the Feds role comes at the end of the payment process when its too late to pick winners and losers, rather than when a project is formally begun or when a federal department or agency requests that a check be written. There are indeed procedures mainly deferrals, rescissions and apportionment available to delay anticipated payments at both of these steps.

4. Why is anyone talking about the acceptability of a few days delay in raising the debt ceiling? The biggest debt ceiling debate of the past week that there wont be an adverse reaction from financial markets if the debt ceiling isnt raised until a few days after the Aug. 2 deadline is a prototypical straw man argument. This contention of Sen. Pat Toomey (R-Pa.) and others might make some sense if a debt ceiling agreement was already in place and Congress and the White House just needed a few days to work out the details. In other words, if we were at the end of July and everyone knew a debt ceiling increase definitely would be adopted in just a few days, Toomey might be right. But the argument makes no sense whatsoever more than two months before the deadline without even the prospect of an agreement. If the markets dont think an agreement of some kind is likely, theyre likely to react negatively both before and after Aug. 2.

5. Why not hold a bake sale? Yes, the federal government can sell or lease some assets to raise cash if the debt ceiling isnt raised. However, there are legal limitations and other restrictions about what can be sold or leased, and the effort isnt likely to raise a great deal of money very quickly. As any financial analyst will tell you, selling the furniture to make a mortgage payment isnt really a sound financial practice. Selling the furniture when everyone knows youre in desperate need of cash is even worse.

Stan Collender is a partner at Qorvis Communications and founder of the blog Capital Gains and Games. He is also the author of The Guide to the Federal Budget.

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