PSC Calls on OMB to Address Critical Need for Default Planning

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PSC Calls on OMB to Address Critical Need for Default Planning

Arlington, Va. (May 25, 2023) On May 19, 2023, the Professional Services Council (PSC) wrote to the U.S. Office of Management and Budget (OMB) regarding the potential for the ongoing debt limit crisis to lead to the Treasury Department being unable to pay all financial obligations at some point, a situation known as “default.” PSC believes that even if the possibility of default is relatively low, the potential consequences are so significant that they warrant OMB issuing guidance to federal agencies.

“If the government were to default on paying its obligations, regardless of its extent or duration, both the American people and global financial markets would need to see that the government is sound and fully functioning. PSC believes the federal government’s best response to such a threat is to continue fully operating all government actions and missions,” said David J. Berteau, PSC President & CEO. “However, PSC conversations with senior federal officials reveal that they are not planning such a response. Instead, for the most part they are operating without clear guidance from the White House.”

PSC highlighted key factors that should shape a judicious government response:

1. Existing appropriations are in place to fully fund government operations through the end of Fiscal Year 2023. With no lapse in appropriations, a default is not the same as a shutdown — and actions typically taken under a shutdown do not apply here.
2. Under default, the Treasury Department will still be making at least some payments. Priorities for such payments should be consistent across the government, not made by individual agencies or programs.
3. Government contractors submit invoices only after they have already incurred the costs and spent the money. Delays in paying such invoices could threaten the ability of such companies, particularly the many thousands of small businesses, to remain solvent.

Berteau added, “It is time for consistent, clear OMB guidance to federal agencies to enable government operations to continue and the public trust to be maintained. In addition, even if we avoid default this time, it is the 11th time in the last 13 years the U.S. has faced a national debt limit crisis. The risk of another debt limit crisis is real and can best be met with one central plan that gives government-wide guidance.”

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