FORMER TREASURY OFFICIAL TWEETS: Here’s Why A Debt Ceiling ‘Prioritization’ Would Be A Disaster

By admin on January 16, 2013

Everyone talking about the debt ceiling and the idea that the Treasury could engage in “prioritization” (honoring some obligations, while not honoring others, so as to maintain a balanced budget and not breach the debt ceiling), needs to see these 9 tweets from Tony Fratto, a former Treasury official under the Bush administration.

The gist: There is NO obvious way to simply “prioritize” payments. The revenue is too lumpy. A default is a real possibility. And there’s no alternative to raising the debt ceiling.

GREAT stuff.

(1) Treasury makes huge regular payments at the beginning of the month — like for Social Security and federal retirement benefits.

— Tony Fratto (@TonyFratto) January 16, 2013

(2) While tax revenues tend to come in during the middle of the month. See why “prioritizing” won’t work?

— Tony Fratto (@TonyFratto) January 16, 2013

(3) To fund gov at the lowest cost &pay obligations on time. Treasury uses short-term financing and small cash management bills.

— Tony Fratto (@TonyFratto) January 16, 2013

(4) The idea that Treasury *could* prioritize — even if desired — is fanciful & misunderstands federal financing requirements.

— Tony Fratto (@TonyFratto) January 16, 2013

(5) We can’t think of Treasury meeting obligations on a *monthly* basis; we have to think of cash management needs on a *daily* basis.

— Tony Fratto (@TonyFratto) January 16, 2013

(6) Because the revenue needs and obligations of an enormous government don’t match up nicely for us — they’re very “spikey” & mismatched.

— Tony Fratto (@TonyFratto) January 16, 2013

(7) Some think Treasury can somehow navigate through this, but Treasury can’t tell SS beneficiaries to wait until the 3rd week of the month.

— Tony Fratto (@TonyFratto) January 16, 2013

(8) Some want to believe Admin is bluffing or being political by saying “default”.To me, actual default is not just possible but likely.

— Tony Fratto (@TonyFratto) January 16, 2013

(9) I don’t know if I can make it any more clear: there is no rational alternative to raising the debt ceiling, & preferably early.

— Tony Fratto (@TonyFratto) January 16, 2013

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