The administration is about ready to play hardball politics with the government's money.
In anticipation of the failure of congress to pass a debt limit increase, the Treasury Department has in hand a plan on who to pay in the event they are limited by an inability to borrow more cash.
Geithner responded with a June 28th letter categorically denying that the Treasury has any capability of prioritizing federal payments: "For all of these reasons, the idea of prioritization has been rejected by every President and Secretary of the Treasury who have considered it. It is unwise, unworkable, unacceptably risky and unfair to the American people. There is no alternative to enactment of a timely increase in the debt limit."
But now The Wall Street Journal is reporting that Geithner has somehow magically solved the "unworkable" prioritization problem and that their is an "alternative" should the debt limit not be raised by August 2nd:
The Treasury Department will detail how it will handle the government's 100 million monthly payments if Congress doesn't raise the federal debt ceiling, pulling back the curtain on a closely held plan that could have dramatic consequences for the economy, the U.S. credit rating and America's political standing.
Wall Street officials believe Treasury will restructure the way it pays bills so that all bondholders, including foreign governments such as China, are given priority, so that the country doesn't default on its debt obligations--something even Greece has been able to manage.
What is obvious is that any sad sack stories of citizens not getting a vital check or poor people being denied benefits will be on the head of Geithner, and not the result of a failure to raise the debt ceiling. The administration will have chosen who not to pay in order to receive the maximum political impact from the decision.
And the press will play along with this charade.
Hat Tip: Ed Lasky