Unlike a funding lapse in which there would be a partial government shutdown, if the government exceeded the debt limit, agencies could remain open and the government could continue to paying some bills out of the money coming in. That’s according to several studies done for Congress in prior years as the government approached debt ceilings. Those reports say that the government could continue to operate on that basis while taking on obligations to eventually pay for costs beyond its current income. Exactly how it would handle those obligations–including to pay the salaries of federal employees and annuities of retirees–is unexplored territory. Even if the pending bill to fully pay on Treasury securities coming due is enacted, questions would remain regarding those other expenses. Options include paying a prorated amount toward every one; paying on a first-in, first-out basis; and paying first on other priorities, such as on contracts that would trigger late-payment penalties against the government otherwise. Studies of the issue warn, though, that the potentially severe impacts on the economy of breaching the ceiling would outweigh even those considerations.
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