WASHINGTON — Absent an early deal to raise the nation’s debt ceiling, the federal government could run out of ways to pay creditors and Social Security recipients by mid-February, earlier than expected, according to a new analysis released Monday.
Among the unpleasant choices to help stave off a default on U.S. government bonds could be temporarily halting tax refunds, or choosing to pay the Chinese government and other bondholders rather than send Social Security checks to elderly recipients, according to the authors of the report.
“Think about what we’re talking about here,” said Steve Bell, director of economic policy for the Bipartisan Policy Center, outlining the very real possibility that the United States, whose dollar is the world’s reserve currency, could follow in the footsteps of basket-case governments such as Argentina or Greece and fail to pay its creditors.
The New Year’s deal between Congress and the Obama administration to avoid the so-called fiscal cliff did not include anything on raising the nation’s debt ceiling of $16.4 trillion, which the Treasury Department said was hit on Dec. 31, 2012. Without a new debt ceiling, the government lacks the ability to borrow in order to pay the debt it already has incurred and owes. It could be forced to determine an order on who gets paid first, China or the elderly, in the event no deal is reached.