Update on Debt Ceiling and Impact on Federal Employees 

NTEU is closely monitoring the bipartisan negotiations regarding the debt ceiling. The implications for federal employees could be significant. 

First and foremost, NTEU is urging Congress and the administration to raise the debt limit before the government runs out of money, which is expected to happen June 1 or soon thereafter. Doing so would make sure the government’s bills are paid on time and it would avoid a catastrophic and unprecedented default that could send financial markets and the economy into freefall.

There is no playbook for exactly how a default would impact federal employees and their paychecks. It is possible that some federal workers could be furloughed or asked to continue working on the promise of back pay in the future. 

Because typical spending outpaces the revenue the Treasury Department brings in on a given day, the federal government would only be able to pay a portion of its bills during a default. As such, the government could decide to delay all payments – including government salaries – until it collected enough revenue to cover them. A second possibility is that the government prioritizes which payments to make during a default, leaving others to go unpaid. In either scenario, agency payments to beneficiaries, states, grantees, contractors and, potentially, their own employees, could be disrupted. 

NTEU is in regular contact with the administration seeking answers to how the government would react to a default.   

This is not like a government shutdown. Because a default has never happened before, there is no way to predict how the Treasury Secretary would decide which government payments are made, and which are delayed.  

Finally, NTEU is also concerned that Republicans in Congress are insisting that massive multi-year cuts to future agency spending be a part of any deal to raise the debt ceiling. The House Republican proposal would also rescind more than $71 billion of the money provided to the IRS under the Inflation Reduction Act of 2022.  

Instead, NTEU believes the debt ceiling should be raised, like it has been repeatedly throughout history, without being tied to cuts in domestic spending. This is the best way to avoid a default and guarantee that federal employees remain unharmed. 

NTEU will keep you updated as negotiations continue.