By Erik Wasson - 09/10/13 02:14 PM EDT
Under the prioritization option, Treasury theoretically could chose some to make payments, such as to Social Security recipients, but forgo others such as refunds to taxpayers or pay for federal workers.
Treasury officials have said prioritization is technically unworkable when applied to non-bond payments, the group noted.
“There really isn’t a financial challenge if prioritizing debt payments,” BPC’s Brian Collins said. He said that is not clear if the market reaction would be worse for defaults on other payments rather than on Treasury bond interest.
Under a delay scenario, Medicare and Medicaid payments could be pushed back from Oct. 18 to Oct. 21, for example, when more revenue comes in. Social Security checks set for Nov. 1 could be delayed until Nov. 13, leaving seniors without money for half a month.
BPC said that under this option, the delays would become longer and longer until at some point payments would have to be missed.
Hoagland said that Social Security recipients could sue the government over the delay and could likely win a judgment since the benefits are legally considered entitlements.
In either case, delays or missed payments would be seen as some type of default, BPC warned. They said there is not conceivable way the real deadline is in December or January, as some in Congress appear to believe.