In a statement, a Treasury spokesman responded to the subcommittee's report, insisting that the administration had not been hiding its capabilities or intent. "As the Treasury Department has explained on numerous occasions, due to the brinkmanship that led our country to the edge of default in 2011 and 2013, Treasury has been forced to consider a range of options with respect to how it would operate in the unthinkable event that Congress fails to raise the debt limit," the spokesman said. "While Treasury has viewed the option of delaying payments as the least harmful option in this catastrophic scenario, make no mistake — this would still be default."
The new documents give the public a first look at the extent of the government's detailed planning for a debt crisis. "At the same time that Treasury was insisting to Congress and the American people that prioritization is unworkable, Treasury and New York Fed officials were working behind the scenes on a prioritization plan," the subcommittee concluded.
The subcommittee cited several tabletop exercises conducted by the Treasury since 2011 that contemplated prioritization of Social Security, veterans benefits, and principal and interest payments as more important than all other federal spending.
The emails from inside the New York Fed paint a picture of the Treasury as withholding information in order to gain leverage in the ongoing negotiations.
"Treasury wants to maximize pressure on Congress by limiting communications about contingency planning," wrote a New York Fed counsel in an internal email in September 2013. Officials there seemed to be concerned with sending a public message to financial markets that there was a contingency plan in place, in order to minimize any sense of incipient panic on Wall Street.
Not everyone inside the New York Fed was happy with the Treasury's "close hold" approach to the planning information. "Agree the close hold here is crazy, counter-productive, and adds risk to an already risky situation," wrote a New York Fed employee on Sept. 24, 2013.