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Federal Eye
Posted at 01:40 PM ET, 07/29/2011

Will it be business as usual at federal agencies next Wednesday?

Rein

With a potentially disastrous default four days away, federal employees and the people they serve are wondering whether the government will be open for business as usual on Wednesday. Or Thursday. Or the week after that, if the political standoff continues in Washington over raising the government’s cap on borrowing.

The answer right now is, no one seems to know— outside a small circle of Treasury Department and White House officials who are not saying.

Much as in the anxious days in April before a last-minute deal in Congress averted a government shutdown, there is a general blackout at federal agencies on which of their operations would stop if the Treasury Department cannot pay some of its bills.

“There has been absolute silence,” said Carol A. Bonosaro, president of the Senior Executives Association, which represents about 7,300 top career executives in the government.

“We have two working days to go,” Bonosaro said. “No one has received any instruction. It’s like pushing a marshmallow.”

As some point, the Treasury Department will have to make public the hard choices it intends to make if it cannot borrow more money next week. Bondholders, the consensus among experts goes, will be paid. So will Social Security recipients whose August payments are due out Wednesday. As for the rest of the more than 70 million checks the government writes each month, if there is a plan for how to disburse them it is still closely held.

“If your question is about the status of next Wednesday’s payments, you’ll need to contact the Treasury Department,” Mark Hinkle, a spokesman for the Social Security Administration, said in an e-mail late Thursday. Press offices for numerous other government agencies did the same.

President Obama has called Tuesday a hard-and-fast deadline for Congress to raise the amount the government can borrow. “We are almost out of time,” he warned on Friday morning.

Some Washington analysts and Wall Street banks say that an influx of tax payments and could keep the government going until Aug. 10.

Federal workers were anxious last spring when they didn’t know for weeks whether Congress would agree on a budget to take the government through the end of the fiscal year. The debt-ceiling debate is bringing up the same worries. But it is a very different situation from a shutdown.

The biggest difference: A shutdown is caused by a lapse in appropriations by Congress, which fails to pass laws that authorize government agencies to spend money. The most recent time this happened was late 1995 and 1996. Thousands of federal workers whose jobs were not considered essential were put in unpaid leave and furloughed.

But when the government reaches its borrowing limit, it must continue to honor the operations Congress authorized when it appropriated money in the budget. Several experts who used to work in government say that means employees must keep coming to work. Maybe the government would cut their paychecks late, this theory goes, but they wouldn’t be sent home.

“The collision with the debt limit is a different game [than a shutdown],” said Joseph J. Minarik, who was chief economist for the Office of Personnel Management during the Clinton administration. “Congress has said the money it authorized must be spent. Treasury may not have the cash to pay them, but [employees] are still expected to show up for work.” Minarik is now senior vice president and research director at the Committee for Economic Development, a business-led public policy institute.

But what if Treasury can’t make payroll? “There isn’t a clear answer to that as of this moment,” Minarik said.

Several things could account for the government’s silence on contingency planning. Making public the services Americans would be denied if the government can’t pay its bills would get a lot of people angry. It could, according to some observers, signal that the White House believes the stalemate between Democrats and Republicans in Congress cannot be resolved. Already jittery financial markets could become more jittery.

“Nobody wants it to look like they want to default,” said Dan Adcock, legislative director for the National Active and Retired Federal Employees Association. “I think the psychology and the politics of this moving forward is, ‘We don’t want to acknowledge the unthinkable.’”

Moira K. Mack, a spokeswoman for the Office of Management and Budget, said in a statement, “The president believes we will resolve this situation and avoid any disruption in government operations or payments.” She added that the budget agency would not engage in “hypotheticals” on what happens if the government loses its borrowing authority.

Federal Workers:

"How confident are you that default will be avoided? Why?"

Joe Davidson, The Post

Tell us

By  |  01:40 PM ET, 07/29/2011

 
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