Default is in the Eye of the Beholder

The Bipartisan Policy Center crunches the numbers and comes out with an analysis of what will happen without a debt deal. The Center’s Jerome Powell breaks down the big findings in an op-ed.

For Aug. 3-31, 2011, we project inflows of $172 billion and bills due of $306 billion — a shortfall of $134 billion. As an illustration, Treasury would exhaust all inflows just by paying six major items: interest, Medicare, Medicaid, Social Security, unemployment insurance and defense vendors. Without cutting from these six, there would be no money for entire departments such as Justice, Labor and Commerce among many others, or for veterans’ benefits, IRS refunds, military active duty pay, federal salaries and benefits, special education, Pell Grants for college students or food and rent payments for the poor. An overnight 44 percent cut in spending would slash many popular and essential programs.

Particular August days will be far worse than the monthly totals suggest. For example, on Aug. 3, we project that the government will have about $12 billion in receipts and $32 billion in committed payments, including a $23 billion Social Security payment. And Aug. 15 presents a triple threat: a $19 billion daily deficit, a $29 billion interest payment and a quarterly refunding auction to pay off a maturing $27 billion bond.

That sounds bad! But my friend Conn Carroll takes the same report, gestures thoughtfully, and slaps on the headline “Bipartisan Study Confirms: Default in Geithner’s Hands.”

The Bipartisan Policy Center released a Debt Ceiling Analysis today showing that even if Congress does not raise the debt ceiling by August 2nd, the federal government would still have enough incoming revenue to pay: all interest on Treasury securities (thus avoiding default), all Social Security obligations, all Medicare and Medicaid obligations, all Defense contractor bills, all Veterans payments, and all active duty troops, and still have almost $7 billion left over for other items.

This isn’t the only debate in which Democrats and Republicans have different sets of facts, but it’s got higher stakes than those other ones.