Budget

Feds should be “concerned” about losing pay, jobs

Steve Bell, the senior director of the Economic Policy Project at the Bipartisan Policy Center, joined the Federal Drive to discuss the ramifications for agenci...

Federal News Network Staff

July 29, 2011 10:11 am

3 min read

wfedstaff | June 4, 2015 9:22 am

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By Vyomika Jairam
Federal News Radio

There’s still no deal in the ongoing debt limit debate. Not even close. And if lawmakers don’t act soon, the government will have some tough choices on spending what little money is left.

Steve Bell, the senior director of the Economic Policy Project at the Bipartisan Policy Center, joined the Federal Drive to discuss the ramifications for agencies. As it turns out, even if Congress can strike a deal, ratings agencies may still lower the U.S. credit rating.

There are two factors at play according to Bell. First is that the government will lose its borrowing authority on August 2.

“So they will have no more ability to borrow and will be able to pay only out of accumulated cash on hand,” starting August 3, Bell said. So what will they spend that accumulated cash on?

“They will make on time and in full the payments to debt holders, and we believe that they will make on time and in full the payments to Social Security recipients. Beyond that, it’s very difficult to say that anybody will be paid on time and in full,” Bell said. “If I were a federal worker, I would be concerned that I would not get paid.”

Bell also has a reminder to federal workers that unlike a continuing resolution, in which employees can be designated as essential, that distinction does not exist in this instance.

“We’re in uncharted territory, and I would think most of the assumptions people are making about ‘Am I essential, am I non-essential?’ are pretty irrelevant when they start having to make this priority decision list,” Bell said.

Making that list, Bell said, is a task that falls on the Treasury and the White House, and will be forced to make some very, very difficult decisions.

“When Sec. Geithner said he didn’t want to be in a position of making such moral decisions, he wasn’t being inflammatory. These are really and truly, at the bottom of it, moral decisions because lots of people’s lives could be affected very badly by some of these decisions,” Bell said. “It’s a terrible position to put anyone in.”

Contractors, however, are guaranteed to be affected, Bell said. Contractors are likely to be “pretty far down the list” of payments made.

The nation’s credit rating is also likely to take a hit no matter what happens, Bell said, but that may not be the biggest problem.

“It seems as though people are forgetting, when they talk about the AAA rating and they talk about default, I think they’re forgetting what an impact this will have on the nation’s economy,” Bell said.

A drop in credit rating might not be too problematic, Bell said, since the rest of the world is much more unstable.

“Our house may be rundown and have rats, but at least it’s not on fire like the rest of the houses in the neighborhood,” Bell said. “Which is scant comfort.”

So if the government does default, what lies ahead for federal employees?

“If it goes on two or three weeks, in my view, there will be substantially more than 50 percent of the civilian workforce in the federal government laid off because that’s the only remaining money,” Bell said.