Scenarios: Obama's options if no deal on debt ceiling hike

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Treasury Secretary Timothy Geithner and a small team of his aides have worked on contingency plans should Congress fail to raise the U.S. borrowing limit by an August 2 deadline.

Officials said on Wednesday the Treasury will lay out a plan in the next few days about how the government will operate if it appears Congress may miss the deadline.

...

Here is a look at the steps Obama could consider:

SALE OF ASSETS

Treasury could consider selling off some of the government's assets, including holdings of gold and mortgage-backed securities.

U.S. officials say this option has major drawbacks because it would show the world the United States is having difficulty honoring its obligations. These officials say the government might also have to accept fire-sale prices for the assets and that the sales likely would not buy much time.

14TH AMENDMENT

Some legal scholars see a possible trump card for Obama in a provision of the Constitution that says the United States' public debt "shall not be questioned."

Those scholars contend the 14th Amendment clause would give Obama the right to bypass Congress and raise the debt limit on his own.

Other legal experts believe Obama does not have the authority to ignore the cap on borrowing set by Congress. Obama administration officials have said they do not see the 14th Amendment clause as a solution to the impasse.

"I have talked to my lawyers," Obama said on Friday when asked about the option at a town hall forum. "They are not persuaded that that is a winning argument."

Treasury Secretary Timothy Geithner said on Sunday that bypassing Congress was "not a workable option" to avoid a default crisis.

On Tuesday, Obama's spokesman, Jay Carney, issued the strongest denial so far that it could be used. "The Constitution makes clear that Congress has the authority, not the president, to borrow money and only Congress can increase the statutory debt ceiling," he said.

PRIORITIZING PAYMENTS

If the Treasury decides that neither an asset sale nor the use of the 14th Amendment are workable, it could look at delaying some payments to recipients of government benefits, government employees, outside contractors or other parties to ensure it has enough cash on hand to keep paying interest on its debts.

The Treasury will collect $172 billion in revenue in August. Without fresh borrowing, that would cover only 45 percent of the $306 billion in payments the government is scheduled to make next month, according to the Bipartisan Policy Center think tank.

Some conservative Republicans have suggested Treasury could manage a default by shutting down many government services and putting a priority on debt payments. Geithner has dismissed this as unworkable.

If talks with congressional leaders on the debt ceiling fail, one big decision Obama would face would be what to do about a $49 billion Social Security payment scheduled to go out on August 3.

Obama has warned that Social Security payments could be at risk without an increase in the debt limit.

Changing the dates of the 80 million payments the government makes every month would also be complicated because the payments are automated so computers would need to be reprogrammed.

http://www.reuters.com/article/2011/07/28/us-usa-debt-options-idUSTRE76R0AV20110728

[dalegg 143]

Yard sale? I can see Bill Gates flying around in a used Stealth Bomber he got for $250 million.

--How about tours of area 51?

[scandal 951]

Some conservative Republicans have suggested Treasury could manage a default by shutting down many government services and putting a priority on debt payments.

If we're going to have an arbitrary selection process for who gets paid and who doesn't, I'd start by cutting off the Social Security benefits to all the elderly family members of those very same conservative Republicans. Let their grannies take the first hit.

[mawilson 2,133]

Geithner has dismissed this as unworkable.

Ultimately, it's not his call. If Obama tells him to prioritize payments, he will prioritize payments.

[scandal 951]

Ultimately, it's not his call. If Obama tells him to prioritize payments, he will prioritize payments.

Or resign.

On a practical level, I can believe that it would be a logistical and operational nightmare to attempt to do such a thing. No amount of wanting a thing to be can make it so if the technical details are effectively insurmountable in the short amount of time required.

[mawilson 2,133]

Or resign.

On a practical level, I can believe that it would be a logistical and operational nightmare to attempt to do such a thing. No amount of wanting a thing to be can make it so if the technical details are effectively insurmountable in the short amount of time required.

I suppose, but ultimately it boils down to a list of checks and dollar amounts - you go through the list and tick yes or no.

Can't be that hard.