Even if the federal government completely stops discretionary program spending in the second half of fiscal 2011, the savings would not be enough to cover federal debt obligations, FierceGovernment.com reports.
The Congressional Research Service released a report June 8, saying the savings would total $688 billion. However, in order for the federal government to continue operating at normal levels through Sept. 30, the Treasury must issue another $738 billion in debt. Without congressional authorization, it cannot issue the additional debt.
“If the debt limit were not raised and all discretionary spending in the second half of the fiscal year were eliminated, the federal government would still have to find further savings to cover its borrowing needs,” the report says.
Congress has not explicitly prohibited the Treasury from prioritizing one debt obligation over another, the CRS report adds.
Treasury Secretary Tim Geithner wrote in a Jan. 6 letter that prioritizing “would merely be a default by another name because the world would recognize it as a failure by the U.S. to stand by its commitments.”