Potential debt limit fallout paints bleak picture for feds

Feds are concerned but agencies have provided no guidance

If Congress fails to raise the government's debt limit before the Aug. 2 deadline, the federal government would face an unprecedented situation.

For the most part, federal employees don’t know exactly how they would be affected by a debt default, and many feds won’t know until the last minute.

A survey of federal employees earlier this month by Government Executive magazine said agencies haven’t shared any information with employees.

More than 100 federal employees told Government Executive that they had not received guidance or communication from their agencies on how to “manage during a default and the potential effect it could have on their pay and benefits,” according to the July 15 report.


Related story:

Debt ceiling debate renews fears for feds


In addition, recent events at some federal agencies have stoked feds’ fears about the consequences of no debt limit agreement.

Almost 4,000 employees at the Federal Aviation Administration were furloughed because Congress couldn’t reach an agreement that would keep them on the job, the Washington Post reported. And, the Social Security Administration announced it would close its field offices 30 minutes early beginning Aug. 15 because it can’t afford employee overtime.

“Federal employees have reason to worry that the present may foreshadow the future,” Joe Davidson wrote in the Post article.

Davidson also noted that 11 agencies have received authority from the Office of Personnel Management to offer buyouts and early retirement this fiscal year, and 15 agencies received the authority last year.

Stephen Losey of Federal Times also wrote about the potential for furloughs and partial shutdowns and summed up the debt limit scenario like this: “Nobody knows exactly what might happen, since the federal government has raised the debt ceiling in the past. But federal employees and retirees are almost certain to be losers.”

Reuters reported July 25 that Treasury Secretary Timothy Geithner and a team of aides have been working on contingency plans should Congress not succeed in raising the nation’s borrowing limit by the start of next month.

The Reuters article also presented steps President Barack Obama could consider – including selling some of the government’s assets, using the 14th Amendment or prioritizing payments – to manage the crisis.

“If Treasury decides that neither an asset sale nor the use of the 14th Amendment are workable, it could look at delaying some payments to recipients of government benefits, government employees, outside contractors or other parties to ensure it has enough cash on hand to keep paying interest on its debts,” the article said.

About the Author

Alyah Khan is a staff writer covering IT policy.

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Reader comments

Tue, Aug 2, 2011

No everyone is not in the same boat. We have the rich bankers getting richer from their plundering of our economy. They are still doing it while blaming the feds for our problems. Raise taxes on the hedge funds, no way. Cut programs for the poor, education, roads, research, but don't raise taxes on the super rich, they just are too wonderful to do that. They won't get their new yacht or won't be able to afford their 10 homes.

Fri, Jul 29, 2011

As Harry Reed stated this morning, the current debt ceiling crisis is a serious threat to the nations national security. The President has full authority to issue an executive order to protect the nation against threats to our national secuity. I think it is time for President Obama to step up to the plate and hit a home run for the USA by issuing an executive order invoking the 14th Amendment and declaring the threat to our national secuity and the failure of Congress to reach any reasonable agreement as the basis for his action.

Fri, Jul 29, 2011

I think "Cowboy Joe" is on to something here! The only caveat I have is that his idea is the only option if we default.

Fri, Jul 29, 2011

The irony is that Washington and their apparent inability to compromise combined with this focus on not raising the debt ceiling until spending cuts are made will have a negative impact on the US credit rating driving up the debt. Duh. Nice job!

Thu, Jul 28, 2011

Just let them do buy outs get let all this people making 100 grand a year retire and bring in the a work force at a lower cost. That is what the public sector does, I know it happened to me and thousands of other people. Get rid of all the fat and make it a mean lean machine again, could start with Congress and the Senate. Thin out that bunch, not doing the American people any good but selling us out.

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