Government Shutdown and Interest Payments on the Public Debt

As mentioned in the correction to the last post, the current continuing resolution permitting much of the federal government to spend money only runs through March 4. Absent legislation being enacted by then, much of the federal government will shut down on March 5. Some agencies will not be affected, but much of the government will be.

The political situation suggests that a government shutdown is not a remote possibility, though everyone involved should be trying to avoid it. If it were to persist more than a day, there would likely be public anger at all incumbents, regardless of party. Who would get the lion share of the blame is not clear; the last time this happened in the 90s, it did not work to the benefit of the Republicans in Congress, a fact that must weigh heavily in John Boehner's thinking.

There still seems to be some confusion regarding a government shutdown and the debt limit. The March 4 date does not involve the debt limit, and payments of interest and principal on the public debt are not affected. There is a "permanent and indefinite" appropriation to pay interest on the public debt, and principal payments are not viewed as a budget outlay.

While a government shutdown should be avoided, consideration of legislation dealing with the budget, appropriations, and taxes is the appropriate venue to debate government spending, tax, and deficit issues. The debt limit, which will hit later this year, is not.