Think the latest GDP numbers are bad? Just wait until the stiffs who punch the clock for Uncle Sam have their paychecks in limbo if no resolution on the debt ceiling is reached.
By Tory Newmyer, writer
FORTUNE – The austerity consensus among policymakers in the debt ceiling debate has ensured that the federal workforce will face cuts — just how much is still unknown. And as soon as next week, government employees could be asked to report for work with no certainty about when they’ll actually receive their next paychecks.
That’s because if lawmakers can’t agree on a plan to extend the federal government’s borrowing authority by Tuesday, the Treasury Department will start running short on the cash it needs to pay the nation’s bills. And it will begin prioritizing payments, with interest on the debt likely at the top of that list.
What comes next isn’t clear — Treasury so far hasn’t tipped its hand on its contingency plan — but it’s a relatively safe bet that checks to rank-and-file workers will place behind benefits owed through Social Security, Medicare, and other social safety net programs, pay to military personnel and vets, and education assistance as millions of kids get ready to ship off for college.
This isn’t the furlough federal employees were facing this spring, when the partisan fight over spending almost led to a government shutdown. In that case, workers would have been sent home without pay, because the federal government lost its legal authority to incur new obligations. In this case, workers can still work; they just won’t know when the feds will once again have the money to pay them.
That will be bad news not just for federal workers, but the rest of us, too, because it will mean the $14.2 billion in salaries and benefits those employees are set to collect in August could be taken out of the economy. The figure comes from a report by the Bipartisan Policy Center that found the government will run a $130 billion deficit in August, forcing it to cut payments dramatically in a potential gut-blow to our our shaky recovery.
“There will be a substantial effect on 3rd quarter GDP,” the center’s Jay Powell says. “And the issue is, is it a tipping point for the economy? Because it’s obviously slowed down dramatically here, and you give it another kick, do you dip back into recession? Who knows. It’s not going to help.”
Colleen Kelley, president of the National Treasury Employees Union, which represents 150,000 federal employees across 31 departments and agencies, says she has no answers about what a failure to raise the debt limit will mean for her members next month. But against the looming threat, her group is punching back against longer-term plans to reduce the deficit on the backs of federal workers. The union has launched a lobbying campaign to pressure lawmakers to back off, in part by trying to highlight “the direct connection between the work of federal employees and the quality of life in the country.”
Public service ads featuring workers describing the services they provide are running on television and radio in major markets across the country, and Kelley is urging her members to follow up by leaning on their elected reps. While the workforce is heavily concentrated in the D.C.-metro area, Kelley says she has thousands of members across the country – ”anywhere there’s an IRS service center, we have four to eight thousand,” like in Utah, a Tea Party stronghold.
And while the foot soldiers of a small-government movement named for a tax protest aren’t likely to see eye-to-eye with tax collectors, there is an odd convergence in their agendas. Kelley is hoping Tea Party-backed deficit hawks in Congress will appreciate that boosting the IRS budget, for example, will actually yield revenue, through tougher enforcement. The official budget scorekeepers affirmed as much this week, estimating that a $13 billion bump in spending on the IRS over the next decade will yield $42 billion in new tax collections.
But if Washington can’t remember how to love the federal workforce, the employees can take some qualified solace in this: They’re still okay by everyone else. Michael Dimock, a researcher with the Pew Research Center for the People & the Press, says recent polling presents a mixed picture of attitudes toward the public sector, with two-thirds support for trimming the federal payroll by 10% over the next decade.
“But they do also empathize with government workers needing to pay their bills,” he says. “There are signs that people are very sympathetic to understanding, hey, we all have jobs, and not getting paid is not very nice.”
Filed under: Contributors, Term Sheet 
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