Although the Obama administration has nothing to say about how a government default would affect federal employees, they may take some comfort in a Congressional Research Service (CRS) report.
The June report quotes a 1995 statement from the Congressional Budget Office that says:
“Failing to raise the debt ceiling would not bring the government to a screeching halt the way that not passing appropriations bills would. Employees would not be sent home, and checks would continue to be issued. If the Treasury was low on cash, however, there could be delays in honoring checks and disruptions in the normal flow of government services.”
But before federal employees get too comfortable, the CRS also says, “federal spending would be affected.” Just how it would be affected apparently is not certain.
“[I]t is not clear whether the distinction between different types of spending would be significant or whether the need to establish priorities would disproportionately impact one type of spending or another,” CRS wrote. “It is also not clear whether the distinctions among different types of obligations, such as contract, grant, benefit, and interest payments, would prove to be significant.”
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