Opponents of raising debt ceiling risk government breakdown, study says

Conservatives such as Rep. Michele Bachmann who contend that the United States will be able meet its primary obligations if Aug. 2 passes without a deal on raising the debt ceiling are, in a sense, advocating for a partial shutdown of the federal government, according to an analysis by a Washington think tank.

A study by the Bipartisan Policy Center in Washington estimates that with the Treasury expecting about $172 billion in returns in August and owing some $306 billion in obligations, 44% of the U.S. government’s bills would go unpaid.

The issue arose Wednesday at a news conference attended by Bachmann, one of two members of Congress running for president. And while her other GOP rivals for the White House can say as much, or as little, about the unfolding crisis as they wish, it’s Bachmann, along with Rep. Ron Paul of Texas, who will have to ultimately cast a vote on the debt ceiling and then explain the repercussions to presidential primary voters.

Bachmann (R-Minn.) returned to work this week after extensive campaigning in Iowa, New Hampshire and South Carolina and quickly injected herself into the fray. An ardent opponent of raising the $14.3-trillion debt ceiling without extensive preconditions, Bachmann is co-sponsoring a House bill that would, in the event an agreement isn’t reached by the Aug. 2 deadline, direct the Treasury to first cover its debt obligations and ensure that military service members and pensioners are paid.

Bachmann, along with the bill’s other sponsors, Reps. Steve King (R-Iowa) and Louis Gohmert (R-Texas), repeated an often-cited GOP talking point: that the government will have more than enough money in August to cover its debt obligations, and that the risk of default is overblown.

“This is a misnomer that I believe that the president and the Treasury secretary have been trying to pass off on the American people and it is this, that if Congress fails to raise the debt ceiling by $2.5 trillion, that somehow the United States will go into default and we will lose the full faith in credit of the United States,” Bachmann said. “That is simply not true. It is important to recognize that revenues continue to come in to the United States Treasury. It is merely the president’s obligation, and the Congress’, to make sure that the interest is paid on the debt.”

While Bachmann’s bill would not direct the Treasury to cover its entitlement program obligations, she and her fellow conservatives argue that the U.S. can make sure that debt is serviced, that Social Security and Medicare beneficiaries see their checks and that members of the military are paid. And according the Bipartisan Policy Center’s study, that’s true.

But, the study says, simply adding the cost of unemployment insurance and paying Defense Department vendors to that mix of first-in-line creditors would completely exhaust the $172.4 billion expected to flow into the Treasury’s coffers in August. That, according to the center, would leave 44% of the federal government’s obligations for the month uncovered, including operating expenses for federal agencies such as the Justice Department.

“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,” Jay Powell, a former Treasury official under President George W. Bush and a scholar at the center, wrote in an op-ed for Politico.

It would also roil markets and hamper the country’s ability to issue new debt, Powell said.

Bachmann was asked about the prospect of a shutdown Wednesday. The candidate demurred, saying, “What we want to do is take the politics out of this issue.” She instead attacked President Obama for suggesting that without a debt-limit increase, Social Security checks may not be issued.

She has been a fierce opponent of raising the ceiling, saying she would agree to do so only if Democrats made major concessions in return, such as agreeing to repeal their massive healthcare initiative. And she has some cover because the large Republican majority in the House may make her vote unnecessary in securing any debt-limit deal.

But at the same time she is a leader of an increasingly hostile faction on Capitol Hill, one that appears to see any compromise with Obama as collusive, and that has been almost as dismissive of attempts of their leader, Speaker John Boehner, to broker an agreement as the president himself.

Gohmert, the Texas Republican, played down Boehner’s assertions that failure to raise the limit could be calamitous, saying the speaker had “been getting bad advice” and that the president has no credibility on the issue.

“The problem with the speaker and him saying that is he believes the president. And I would encourage the speaker not to believe the president anymore,” Gohmert said.

For his part, the other presidential aspirant in the House, Paul, said Thursday that the United States’ AAA credit rating was not worth saving. The bond-rating agency Moody’s has said it will consider downgrading the country’s rating should a debt-ceiling deal not be reached.

“I think if you really had a market evaluation on this issue, it should have marked down a long time ago,” he said in an interview with Bloomberg TV. “We play along with this game with Social Security. We know it is insolvent. We know that if it were an insurance company, it would be in big trouble. So it is true that this rating will have an effect, but it is a short-time effect. Ultimately, the fundamentals show this country is bankrupt.”

james.oliphant@latimes.com