If credit runs out, what bills will Treasury pay?

If Congress doesn't master the trick of raising the debt ceiling, then the day after Halloween will be no treat.

Nov. 1 is looming as the critical day when the Treasury Department may not have the money to meet all its commitments if officials don't boost the $16.7 trillion limit on federal indebtedness, according to reports by Goldman Sachs and the Bipartisan Policy Center.

The government is likely to have enough cash to make a $5.9 billion interest payment due on Oct. 31, but the $43 million of Social Security and Medicare payments due the next day, plus billions for Supplemental Security Income payments and payroll for soldiers and government workers, will break the bank, said Steve Bell, director of economic studies at the BPC.

The Treasury is expected to have about $30 billion in cash on hand at Oct. 17, the date Treasury has said the debt ceiling is likely to be reached.

"A number of large payments totaling about $60 billion are due Nov. 1, and it appears very unlikely the Treasury would be able to make all the payments scheduled for that day absent an increase in the debt ceiling,'' Goldman economists Alec Phillips and Kris Dawsey wrote over the weekend.

In recent days, opponents of raising the debt ceiling have argued that the nation can avoid a default by paying interest on the debt before the government pays for entitlement spending and routine operations.

President Obama rejected that idea in a press conference Tuesday.

"We've got a lot of other obligations" in addition to making interest payments, Obama said, citing senior citizens and veterans counting on their benefits checks and to companies that do business with the government.

"What's also true is if the markets are seeing that we're not paying all our bills on time that will affect our creditworthiness even if some people are being paid on time," he said.

A strategy of making only interest payments would be short-lived anyway, said Moody's Analytics chief economist Mark Zandi.

Even if the government made its Nov. 1 payments, a $30.9 billion interest payment due Nov. 15 looms after it, Zandi said. Including that payment. Washington is likely to have a cash shortfall between $60 billion and $70 billion from Oct. 17 until Nov. 15, he said.

"If they don't prioritize payments there's no way they make that payment on time,'' Zandi said.

And "prioritization,'' Washington's newes

t buzzword, is much easier said than done, Bell said.

The government processes between 3 million and 5 million checks each day, he said. Nearly all of them are produced by machine, or the payments are made electronically, as computers at Treasury communicate with systems at agencies like Social Security that are actually spending the money.

Deciding to make some payments and withhold others would require on-the-fly reprogramming of information systems throughout the government within days, said Bell, a former staff director of the Senate Budget Committee. It would also mean a conscious decision to skip Social Security and veterans' benefits or not pay soldiers and workers,he added.

"They're not the most up-to-date computers in the world,'' Bell said. ``You just can't do it.''

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