Kelley Warns of ‘Chaos’ in Failure To Reach Agreement on Debt Ceiling

Press Release June 30, 2011

Washington, D.C.—The leader of the nation’s largest independent union of federal employees today warned Congress of “chaos” disrupting the ability of federal workers and their agencies to serve the public in the event of a failure to raise the federal debt limit.

In a letter to every senator and House member, President Colleen M. Kelley of the National Treasury Employees Union (NTEU) said more than 250 well-respected economists had warned that such a failure would not only destroy jobs, it would seriously threaten the nation’s economic recovery.

Moreover, the NTEU leader took critical aim at the willingness of “some members” of Congress who, she said, “are trying to use this crisis to push drastic cuts in federal programs and in benefits for the federal workforce, which is already under a two-year pay freeze.”

She noted that several senators earlier this week had written to Treasury Secretary Timothy Geithner claiming that even if the debt ceiling remains where it is, there would be more than enough money in the Treasury to make the government’s debt payments, thus avoiding default. “This is simply not true,” she said.

President Kelley pointed to a report earlier this week by the Bipartisan Policy Center indicating that if the debt limit is not raised, the government would be unable to fund about 44 percent of its obligations and would have to furlough about 800,000 federal employees.

“There would be no funds for unemployment insurance or Internal Revenue Service (IRS) refunds,” she wrote. “The Veterans Administration would have to close its doors.”

Major budget cuts, such as those proposed—and potentially under discussion as part of debt ceiling negotiations—for the IRS, the Food and Drug Administration and other agencies “would have devastating and counterproductive impacts not just on agencies and employees, but on the public, as well,” Kelley said.

For example, a proposal to slash $606 million in IRS funding surely would have an adverse impact on the agency’s ability to collect the vital revenue government needs, she said.

Federal employees’ retirement plans are under attack with a proposal that could amount to a pay cut of approximately 5 to 6 percent. The effective pay cut would be on top of the two-year pay freeze that federal employees already face.

“Federal employees face the same economic challenges as their fellow Americans, including family members who have lost jobs. They are paying increased health premiums out of their diminished salaries, and they are not shielded from rising food and gas prices,” said Kelley.

Only a few months ago, Kelley wrote, federal employees went through the anxiety of not knowing if they would face furloughs because Congress had not passed the necessary funding bills. “Now, they face threats of pay cuts and pension decreases, as well as another threat of furloughs because Congress hasn’t passed legislation to increase the debt ceiling in order to pay the bills for spending that has already occurred.”

She added: “It is past time to stop using federal employees as pawns and take responsibility for actions you previously authorized.”

As the largest independent federal union, NTEU represents more than 150,000 employees in 31 agencies and departments.

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