The Global Implications of US Politics and Debt Negotiations

The US treasury won’t be able to pay all its bills if a debt ceiling agreement isn’t reached. The question then would be: Who gets paid first?

The answer is: nobody knows.

“In principle and in practice we really have no history or protocols as a country for how the United States Treasury might go about prioritizing payments to ensure that our creditors get paid,” said Matt Slaughter, associate dean at Dartmouth’s Tuck School of Business. “There are no laws that dictate how this could happen; there are no regulations that have been written.”

For example, would the government send out social security checks or would it sign off on aid to Ethiopia, Kenya, or Columbia? Would the US help Israel or send checks to American men and women in uniform?

Again, nobody knows for certain, but a few analysts were willing to hazard a guess.

“It’s not hard to imagine a lot of people in Washington D.C., especially elected officials, might worry about going home to their districts and explaining to their constituents why they didn’t get their social security checks, but why we paid the United Nations,” said Slaughter.

Bryan Riley at the Heritage Foundation said, “If the debt limit is not raised and the government has a choice between sending out social security checks or sending foreign aid payments to Egypt of Pakistan, I would bet that the social security checks get top priority.”

And Stewart Patrick at the Council on Foreign Relations said, “I would imagine that foreign assistance would rank relatively near the bottom of their priorities.”

Patrick says it’s not hard to understand why things like foreign poverty alleviation or agricultural development overseas get low billing.

“The reasons are pretty self explanatory,” said Patrick. “One of them is that there are many military installations spread throughout Congressional districts as well as defense contractors. When it comes to foreign assistance, it’s much less clear how this immediately benefits members of Congress to vote for foreign assistance, which can easily be tarred as pouring money down a rat hole, and this has been a perennial issue in US foreign policy.”

Patrick says it’s easier for legislators to justify foreign aid when the United States is flush. But times are tough. And many Americans are asking why we’re not nation building at home.

Bryan Riley at the Heritage Foundation says the pressure to cut foreign spending will only mount.

“And this is going to occur whether we increase the debt limit or not,” said Riley. “There’s going to be attention paid to foreign aid programs, it could be what we traditionally think about as foreign aid, there’s going to be pressure to look at the States Department’s budget, there’s going to be pressure on all the international agencies that the United States belongs to, as with all federal spending programs.”

Just last week, House Republicans proposed slashing payments to the United Nations and other international bodies. The Republican plan also would put more restrictions on aid to Pakistan and Egypt. If the bill passes the House, it’s expected to be dead on arrival in the Senate.

Still, the Republicans might get their way. If the US government can’t come up with the money to pay all its bills, countries that rely on American foreign aid will have plenty of reason to worry.