Unless the U.S. Congress increases the federal debt ceiling by August 2, 2011, the Treasury will soon run out of the money needed to pay all of the government's monthly obligations. In order to avoid defaulting on its debt, a situation that could cripple the U.S. economy for years, the Treasury will be forced to choose which federal programs will not be funded. The painful question is, who will get paid and who will not?
How it Came to This: On May 16, 2011, the U.S. government reached its current debt ceiling of $14.29 trillion, at which point the Treasury began dipping into its $232 billion emergency borrowing authority allocated for "extraordinary measures." This allowed the government to temporarily continue fully funding all its programs. But according to Treasury Secretary Timothy Geithner, the entire $232 billion in "emergency" funding will have been used by August 2, at which point the Treasury will be forced to stop funding some programs. Which programs?
One good analysis of this bad potentially very bad situation comes from the Bipartisan Policy Center (BPC).
In its report Debt Ceiling Analysis 2011, BPC states that from August 3 through 31st, the government will take in about $172.4 billion, but would need to spend about $306.7 billion to fully fund all programs, meaning the government will be unable to fund programs costing some $134.3 billion over that period.
Winners: Programs BPC predicts will most likely continue to be funded from August 3rd to at least August 31st are:
Social Security Benefits - $49.2 billion
Interest on Treasury Securities - $29.0 billion
Medicare/Medicaid - $50 billion
Payments to Defense Vendors - $31.7 billion
Unemployment Benefits - $12.8 billion
The total cost of the programs to be continued comes to $172.7 billion, slightly more than the $172.4 government will take in.
Losers: Here comes the pain... Programs most likely to not be funded from August 3rd to at least August 31st are:
Pay for Active Duty Military Personnel - $2.9 billion
Veterans Affairs Programs - $2.9 billion
Federal Salaries and Benefits - $14.2 billion
Dep. of Education (Pell grants, special ed. Programs, etc.) - $20.2 billion
Food/Nutrition Services & TANF - $9.3 billion
Dep. Of Labor (training and employment services) - $1.3 billion
Dep. of Justice (FBI, federal courts, etc.) - $1.4 billion
Dep. of Energy (energy research, nuclear programs) - $3.5 billion
Health and Human Services Grants - $8.1billion
Federal Highway Administration - $4.3 billion
Environmental Protection Agency - $0.9 billion
IRS Tax Refunds - $3.9 billion
Small Business Administration - $0.3 billion
Federal Transit Administration - $1.3billion
HUD Programs (housing assistance) - $6.7 billion
Other Spending - $52.8 billion
The total cost of the programs to not be funded comes to $134 billion, or the difference between the government's revenue and costs without the ability to borrow more money.
Debt Ceiling Analysis 2011 also presents a second scenario under which additional "safety net" social benefit programs, including food and nutrition programs, and housing assistance and education assistance programs continue to be funded at the cost of programs like the Centers for Disease Control and the Interior Department.
The report also includes an interesting day-by-day analysis of the U.S. government's daily cash flow - income vs. expenditures - from August 3rd through August 15th.
Of course, whether the debt ceiling is raised or not, the basic problem remains: the U.S. government borrows 40 cents of every dollar it spends.
Photo: GOP Reps Introduce "CAP the DEBT" Act - Chip Somodevilla/Getty Images