This is really scary stuff. The GOP is playing with fire.

Added emphasis mine:

Unless Congress intervenes, the U.S. government will bump up against the debt ceiling some time in late February. At that point, the government will only have enough tax revenue to pay about 60 percent of its bills — and it won’t be able to borrow more money to make up the difference. So what happens then?

For some Republicans, the answer is simple: The United States should keep funding the crucial stuff and let the rest of the government shut down. “We should pass a bill out of the House,” said Sen. Pat Toomey (R-Pa.), “saying there will be certain priorities attached to certain things, namely payment of debt services and payment of our military.”

For many economists, there’s one clear priority: The United States absolutely must not miss a payment to bondholders.This option is known as “prioritization.” It’s the idea that the government can selectively pay some of its bills so that the nation doesn’t default on its debt payments — the doomsday scenario. It may sound appealing. But there’s also good reason to think that prioritization may be unworkable. […]

For many economists, there’s one clear priority: The United States absolutely must not miss a payment to bondholders. The global financial markets are structured around the notion that U.S. Treasuries are the safest asset in the world. If that assumption were ever called into question, havoc would ensue. It ‘would be like the financial market equivalent of that Hieronymus Bosch painting of hell,’ says Michael Feroli, chief economist at JP Morgan.

In theory, Treasury might be able to prioritize bond payments above all else, says Steve Bell of the Bipartisan Policy Center. The computer system that handles U.S. sovereign debt, Fedwire, is separate from the system overseeing payments to government agencies and other vendors. Yet it’s unclear whether Treasury has the legal authority to prioritize in this way — the agency has never dealt with this situation before. ‘Anyone who says they know for sure whether this is legal is not telling the truth,’ says Bell. […]

More at The Washington Post…