With the deadline to breach the federal debt ceiling just around a week away, uncertainty remains about the exact impact on federal employees if the White House and Congress fail to find a way to raise it, including the potential impact on the salary of some and a partial stoppage.
Negotiations between the two are continuing, with some signs of a possible deal ahead of a breakup, which could otherwise happen as early as around June 1, although some projections show it could not arrive until around a week later. . Reports from those discussions indicate that the focus is on revoking authority for certain COVID-related relief that has been previously approved but not yet spent, and setting a series of spending caps for spending. federal discretionary spending, that is, spending that is not mandated by laws such as Social Security.
However, there are apparently differences as to how long these caps would remain in place, how tight they would be and whether the Ministry of Defense would be exempt from them, as it would be under a bill. that the House passed several weeks ago on a party-online vote. Apparently also being discussed are politically charged potential policy changes such as speeding up the approval process for fossil fuel projects and adding new work requirements for programs such as food stamps.
Limiting agency spending over the long term would almost certainly result in pressure on agency employment levels, although just how serious this would be and when it would start to be felt is uncertain at this stage.
It is also unclear how exceeding the limit would affect government operations in the short term. This is uncharted territory, but the closest parallel involves partial branch closures during funding periods, in which employees in positions designated as vital to health, safety and security must remain at work, although in the meantime unpaid. Other employees are furloughed, although unlike a funding hiatus, there would be no guarantee of being paid later.
The government would continue to raise money from taxes and other forms of revenue and would likely prioritize obligations such as paying interest on government bonds and redeeming those that have come due. However, a severe shock to the economy is widely predicted from a default, even if these payments are made.
Congress had planned to be in recess next week, but would likely stay in session if a resolution could not be reached this week. The prospects for such a resolution remain uncertain, given the opposition of some of the two parties to the potential policy changes.
Several other options, such as declaring the debt ceiling unconstitutional or invoking special House rules to force a vote on raising it, are considered long shots.
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