Debt ceiling debate renews fears for feds

Federal employees could soon be facing furloughs or holds on their salaries and benefits if the debt ceiling debate is not resolved before the Aug. 2 deadline, experts said.

Feds faced a similar problem a few months ago when the government nearly shut down because lawmakers couldn’t agree on funding for this fiscal year.

In the debt ceiling battle, the consequences of not reaching a resolution are more worrisome because they are unknown, said John Palguta, vice president for policy at the Partnership for Public Service. 

“We have never gone through a situation where the government has literally run out of money,” Palguta said. “What happens will depend on the decisions the president will have to make.”


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The "scary thing," he said, is that those decisions will have to be made on a day-to-day basis and will likely include halting programs or services that the government can’t afford.

According to a recent analysis from a public policy group, if the debt ceiling is not raised before the Aug. 2 deadline, the government would be unable to meet a wide range of spending obligations that include federal salaries and benefits.

The analysis released June 28 by the Bipartisan Policy Center said after that date the Treasury Department would begin to prioritize payments to stay under the debt limit. 

For instance, the Treasury Department could exhaust all August income by paying only six items – interest on existing debt, Medicare, Medicaid, Social Security, unemployment insurance and defense contracts – and have no money left to pay for others things such as veterans’ benefits, tax refunds, military active duty pay and federal salaries and benefits, the group said.

Colleen Kelley, president of the National Treasury Employees Union, reminded members of Congress in letters sent last month that feds just went through the anxiety of a shutdown.

“Now, they face threats of pay cuts and pension decreases, as well as another threat of furloughs because Congress hasn’t passed legislation to increase the debt ceiling in order to pay the bills for spending that has already occurred,” she wrote.

Palguta advised that federal managers should start conversations with their employees about debt limit negotiations.

He said managers should acknowledge that this is unchartered territory for the government, and they should reassure employees that they will share information on how failing to raise the debt ceiling would impact their agency or program as soon as they have that information.

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