Crisis Real For August 2 Debt Deadline

Tough decisions will have to be made if borrowing limit isn't boosted.

By TOM RAUM
THE Associated Press

Published: Saturday, July 16, 2011 at 1:19 a.m.

WASHINGTON | Horror stories are flying about the damage that might be wreaked should Congress and President Barack Obama fail to cut a deal by the Aug. 2 deadline to increase America's borrowing limit. Nearly every American is in harm's way, either directly or indirectly.

Absent a deal by then, the government would find itself tight on cash and unable to borrow — and have to start deciding which of the 80 million bills due in August it should pay and which it should put off.

Tough decisions would come immediately: On Aug. 3, some $23 billion in Social Security benefit payments are due to be processed. On Aug. 4, the Treasury Department must pay $87 billion to investors to redeem maturing Treasury securities. On Aug. 15, more than $30 billion in interest payments come due.

In addition to those costs, the government normally pays $5 billion to $10 billion daily to defense contractors, Medicare providers, federal employees and others.

Obama has said he can't guarantee Social Security checks and payments to veterans and the disabled will go out on schedule in the absence of a deal. He could be challenged on that, however, because some legal and congressional budget experts question whether he can unilaterally decline to pay Social Security benefits if there are still assets in the program's trust fund.

Regardless of how that issue is resolved, there's no question that government services, programs and benefits could take an enormous hit.

 

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