From Slate Magazine
Matthew Yglesias has four problems with the proposal to prioritize debt payments to avoid defaulting on the national debt.
“1. It’s illegal: Treasury is not authorized to unilaterally decide to pay certain bills and not others… 2. It’s also impossible: Because payment prioritization is illegal, Treasury’s payment system is not designed to allow prioritization to happen… 3. The timing doesn’t work: Over a given year, the Treasury certainly collects more in taxes than it pays in interest. But that’s not necessarily true on any given day.”
“4. Prioritization doesn’t solve the problem: Even if all these problems could be waived away, you’re not really solving the underlying problem. Yes, bondholders would still get their money. But nobody in the future could seriously treat U.S. government debt as a risk-free information-insensitive asset.”