Having them pay valid-payments but not-pay not-valid payments is just too much to expect of the US Treasury

An ex-US Treasury assistant secretary (let’s keep in mind there are lots of these guys at any given time and they rotate in/out the Cathedral revolving-door, so just from randomness one might expect to find ‘ex-assistant secretaries’ with all sorts of opinions) tweeted a series of tweets that would seem to be another nail in the coffin of my much-lauded** (**by me), Nobel-Prize-winning -eligible Split The Difference solution to the debt crisis.

If I’m reading his tweets correctly, essentially his point seems to be that US Treasury processes and systems are so incompetent that they will not be able to ‘prioritize’, i.e. make some payments but not make other payments, in a way that ensures that the ‘some payments’ they do make include all owed principal & interest payments on actual debt. Hence, a debt-ceiling crunch, contra-moi, would indeed probably mean a default, if only just by accident – some interest payments would be missed in the resulting fog of bureaucratic panic.

Oh well. I mean, far be it for me to dispute an insider’s account of the incompetence of the systems and processes of a large institution such as this.

But thinking about it, I’m not sure how what he’s saying can be true. Assume for the sake of argument the US Treasury indeed cannot differentiate between ‘payments they should settle’ and ‘payments they shouldn’t settle/should hold up’. Okay. But let me ask this: what if there were a ”DEAL”? A ”DEAL” that (I know, this is a huge hypothetical) involved Congress actually reducing prior authorized payments on some things? What would the US Treasury have to do in response to such a ”DEAL”? Why, I reckon they’d have to examine the legislation in question or work with Congress or otherwise somehow figure out which spending has now been cut, so as to not approve payment requests associated with those things (but still approve payment requests associated with still-valid spending).

In other words, they’d have to…you know…prioritize between spending they’re supposed to make, and spending they’re not, and not do the latter, but still do the former. The only difference with a ‘prioritization’ scenario is that there’s a guy (Obama, or whoever), instead of a Congressional bill, making the decisions re: what to pay and what not. But big deal, either way surely the ‘what should we pay?’ part of the equation has to go through some human(s’) brains. Really, this function is just a thing that naively you’d think they’re supposed to be doing all the time. It’s practically the definition of a ‘Treasury’.

And he’s saying they can’t do it.

The only way I can really picture this being true is if the US Treasury simply rubber-stamps and mindlessly-approves all invoices that get sent to them. Random invoice comes in: “You owe us 980 million dollars. Please pay up by the 7th.” Treasury computer system: “Okey-dokey!” And that’s what the US Treasury does. (?)

Can that be how it works? Honestly, if it is, don’t answer that. I’m not sure I want to know.

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6 Responses to Having them pay valid-payments but not-pay not-valid payments is just too much to expect of the US Treasury

  1. tangentstyle says:

    My hope is that his point is that in the ensuing short term chaos a payment might be missed. In the case of a ‘deal’ the spending decisions and thus prioritization would not be so immediate and sudden.

    • I think that chaos/might miss a payment is his point, yes.

      But as far as I can tell, there’s no reason a ”DEAL” couldn’t happen at any time up to and including whatever last-minute he thinks would be so short-term as to cause such chaos in a ‘prioritization’ scenario. All the difficulties of managing cashflows (payments coming in at t1, payments going out at t2, etc) still would be in play. So, if what he’s saying is true, they might just as easily accidentally default if there’s a last-minute ”DEAL”.

      If that’s the case, then ‘oh well’ is my answer.
      I guess he’d say that’s not the case, and he might be right (I guess he’d know), but I just fail to see what would be so much harder about ‘doing prioritization’ than ‘complying with a last-minute deal’.

      See my point?

      • Dave says:

        It is obvious he is providing the President an excuse to equate default with failure to pay general government vendors.

        “We can’t entertain that idea because it is not “technically” possible.”

      • tangentstyle says:

        That’s a valid point. I always kind of held the idea in my head that even when the $ backing current government projects was revoked, there would be some semblance of an orderly wind down, as opposed to invoices coming in and not being paid, or a bunch of guys building a bridge just stopping and leaving.

        I guess my sincerest hope is that this guy is fully making this up. The alternative is really pretty scary (a government that literally cannot control the who/what/where of financing its activity).

        • Exactly. Now, I don’t think he’s making it up. But I do think he is guilty of some kind of bias towards ‘how they do things’. “We’re only set up to spend money, not not-spend money!” :-) There is also a bias against having to be put through fire-drills. The subtext maybe being essentially, ‘yes, we COULD do it but it would be a huge pain in the ass and some people would have to come in on a weekend’. Which, I can understand.

          But really, (a) they must have *some* kind of mechanism for confirming, Is this a valid, Congressionally-authorized payment category and size? (It *can’t* be that they simply rely on the submitter’s word…). And (b) there must be situations in the normal course of business where money is ‘cut’, yanked quickly from someone’s budget or shuffled over to someone else’s. (It *can’t* be that all ‘wind-downs’ are orderly, gradual and happen over 6+ months.) If nothing else, they never know whether a ‘continuing resolution’ will be passed, what will be in it – etc. Especially in today’s context of no-budgets and constant standoffs, there is a constant, regularly-scheduled ambiguity to how much they are supposed to be spending just as a matter of course. So, by definition the Treasury is supposed to handle such last-minute-change situations, and by implication, they have been.

          But any ‘deal’ (unless it just increased the debt-ceiling with no effect on spending) would be, almost by definition, just such a situation. So, he’s basically saying they’re not equipped to handle a ‘deal’ either. But of course, taken literally, what he’s saying is they’re not equipped to function at all.

  2. Pingback: Asking the Treasury Department to adjust payment amounts is as ridiculous as having the Defense Department effect national defense | Rhymes With Cars & Girls

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