Jose Luis Magana/AP Photo
The U.S. Department of the Treasury building in Washington
After public outrage beat back the Office of Management and Budget’s attempt to pause all federal grants and loans, I explained that the democracy crisis was in no way over, that the executive branch was still illegally withholding funds appropriated by Congress, and that this was intended to pick a fight to overturn the constitutional order and delete the legislative branch as a factor in governing.
But the crisis took a sharp turn and ramped up significantly over the weekend, at the direction of an unelected South African mega-billionaire. Elon Musk’s charges have forced their way into accessing the Treasury Department’s Bureau of the Fiscal Service, the nerve center of one of the government’s core functions: making payments to grantees and beneficiaries. According to published reports, the most senior nonpolitical Treasury official, David Lebryk, resigned after a dispute with Musk over the payment system, and Treasury Secretary Scott Bessent has given Musk’s team some level of access to it.
A handful of nonpartisan civil servants have worked to perfect the government’s payment plumbing and ensure that 1.4 billion payments a year, worth about $5.5 trillion, are delivered flawlessly and on time. Now, Silicon Valley expats in their early twenties are poring over the code, trying to reorient it into something that can withhold payments Musk deems illegal based on random Twitter posts. And that’s if the system doesn’t just melt down over the removal of fail-safe elements or the imposition of errant code.
Crisis is the best word to describe it. And Nathan Tankus, author of the Notes on the Crises blog, is the person best equipped to explain what is happening and why it’s so utterly crucial. Just this morning, Tankus released a great explanation on his website of the events of this weekend, and the threats of what might happen as a result. I talked to Nathan this morning about the situation. An edited transcript follows.
David Dayen: Where should we even begin. Maybe let’s start by giving us a sense of what the payment system does and how intricate and massive it is?
Nathan Tankus: Sure. I think the best place to start is actually not with the Treasury at all. If you’ve interacted with the banking system, which the vast majority of people have, you have this idea that your payments are being processed and there’s something going on behind the scenes. If you get a Social Security check, you are not getting some government IOU object. Most likely you’re getting direct deposit into your bank account. Most experts of the banking system, if they are talking about government payments, they say the Treasury sends a payment, it’s debited at the Treasury account and forwarded into your bank account. Anything beyond that, even for most experts, law professors, economists, for them that is the end of the story. But it’s not.
There is an even more arcane payment system. It’s not actually true that the Treasury is sending a payment out of its general account. It’s true in some technical sense. But the Treasury didn’t make the decision to send the Social Security check. They didn’t identify who you were, didn’t make sure you were deceased. It was the Social Security Administration. That brings up the obvious question, how does something go from the Social Security Administration to being a Treasury payment? When you think through the next logical step, it’s something most people think about as irrelevant. But my friends and I have thought about it as a shared project for many years: the payment plumbing behind the payment plumbing. One of the things we were very concerned about was its vulnerabilities. What’s really going on is not Treasury sending out a payment, the Treasury is in this last step an intermediary for the Social Security Administration.
And so if it’s merely an intermediary, if there was a desire to reduce fraud in government payments, would the Treasury Bureau of the Fiscal Service be a logical location for that?
Absolutely not. You could build another system that could be a check in the validation of payments. The Bureau of the Fiscal Service plays some role in that. It has a do-not-pay system. Before a payment gets final validation, it gets cross-checked to a list of do-not-pay. That’s already part of the process. All of these processes can be improved. But the issue of improper payments, we’re not talking about fraudulent payments but improper payments, is about greater internal control at the agency levels. It’s about doing a better job of matching bank accounts, matching death registries. This is something that the Bureau of the Fiscal Service has been focused on. They make proposals around these sorts of issues. And these proposals don’t get funded. That’s why they do not happen. The payment process inefficiency isn’t because there’s some lazy bureaucrat who won’t do a thing. Their proposals to do things more efficiently cost money. What we know about reducing fraud, the old saying is, you have to spend money to make money. It’s the same process of spending money at the IRS so you can do more technical audits and get a return of revenue.
So we heard about how Musk’s people got access to the payment system, and then later reporting included unnamed sources saying that they only have read-only access at the moment. What do you think they’re up to? What could be done with read-only access?
I won’t speculate about all the things you can do with read-only access. The basic fundamental issue is, you read the code in order to understand it and make changes to the code. Why else are you looking at code except for proposing changes? The top civil service professional, a man who was just named acting Treasury secretary for a while, and technically appointed by Trump for that position, said that this is too serious for me to be willing to accept, and was put on paid administrative leave and then “made the decision” to retire but really was forced out. That is the sign above all signs that this isn’t a trustworthy process. If Musk managed to get the White House to personally order this person fired, the idea that oh, Treasury Secretary Bessent would then, when it came to actual changes to the code, would suddenly stand up to the pressure from the White House and Musk, is not plausible and there has yet to be produced any evidence of its plausibility.
With the evidence we have, they are using read-only access to look at code, propose changes, and then push for those changes to be implemented. And we’re still very early in that process. We don’t know who else is going to be leaving this important department or who is going to be fired. This all happened on Friday, it’s now Monday. This is the next business day. We don’t know how many times we will iterate this process, with the next person saying this is irresponsible and getting pushed out. I will say without revealing any more details, I have heard from a number of former Bureau of the Fiscal Service people already, since my piece has come out, and they all confirm my analysis. They say I’ve gotten the legacy IT system issues right and am right about the extreme concerns.
So let’s say you’re right and they get full access, and the ability to make changes. How granular could that get? I’ve seen a lot of speculation about, oh these people have access to my Social Security number, he can withhold my Social Security payment. Are we really talking about disapproval of payments at the individual level, or would it have to be broader categories?
They are nowhere close to the ability to block individual payments at the Bureau of the Fiscal Service level. I’ve seen people speculate that it’s already happening, but it’s very hard to see what’s going on. Musk bloviates a lot, and they are concurrently infiltrating the agencies. The slow-motion trench warfare is happening and they have had successes on that front, like with USAID. What happens when they get an agency to bend to their will and control an agency, they could shut off payments at that source. With legacy IT systems, it’s impossible that they’ve gained any capabilities, at least yet. Even if people are putatively complying with DOGE and that, they are not eager, to say the least, for this stuff to happen. I don’t think worrying about individual payments is on the track for the near future.
That being said, they can potentially be at the point, depending on how much more authority they get at the Bureau of the Fiscal Service, to cut off the payments of an agency. If an agency is resisting, on an unclear timeline, they may be able to suffocate one agency’s payments. And if there’s even one day payments are not going out, it can be catastrophic. As we saw last week with the freeze at OMB.
Right, so I was writing about that last week. That push to impound funds was based on very deliberate legal theories from the OMB director and his allies, and was obviously meant to pick a constitutional fight that filters up to the Supreme Court. But this is something different. What do you make of that? Was the Supreme Court option just too slow for the Silicon Valley “move fast and break things” mindset?
I think there are a few different layers. This is clearly a Musk initiative. I’m not saying Trump is secretly against it. But I don’t think it was part of the original vision. It was a melding of the minds as their bromance continues. Most experts don’t care about the Bureau of the Fiscal Service. If Trump even heard the phrase “Bureau of the Fiscal Service,” he would immediately tune out. So sure, [Musk] can play with the Bureau of something or other.
As for Musk’s motivations, you have to remember that Musk is a co-founder of PayPal. He has a longtime focus on payment. He swung back around on payments, just announced this Visa deal [with X]. He has had these weird fake deep thoughts about money that he’s said or tweeted out. I think he thinks there’s an answer there. When I read his tweets, obviously there’s a mixture of lying and bloviating. But he is genuinely shocked by the concept of Treasury not stopping a payment. In his mind that’s a huge risk and a problem. Also it’s the data, the information. He realizes that stuff is incredibly valuable. Only as they’ve had this annoying back-and-forth that they’ve realized the power and possibility of this.
I don’t think any of them have thought through the implications. To the experts who first saw the reporting on Friday, we had the same thoughts at the same time. But if you’re not one of us … I don’t think Musk understands the full scope of what he’s playing with. That’s why in the piece I focused on the possibility of them breaking things. I think they have no idea what they’re doing. They are coming across systems for the first time. They’re thinking, oh you can do that. The possibilities are exciting but they have no vision for an end point to any of this. I want them out of there now. It is very unclear, I think that they got in there, realized yeah this can help with impoundment and you should be able to stop payments, then they heard, oh you don’t stop payments at Treasury? Now they’re obsessed with idea of stopping payments. It’s possible that at the time of the publication of my piece none of them had thought through the full implications.
I think it’s right to not assume perfect competency. So from an information technology standpoint, how easily could we tip from a flawless flow of payments into something broken?
I think the operational risks, they’re so multi-varied, even trying to come up with an answer of how many, it’s like where do you start. Maybe the first is introducing non-native technology. Technology goes through a rigorous process to be used by the federal government, it’s checked for various safety issues. How many more years did people like Obama use BlackBerrys when everyone, including CEOs, were using iPhones? There’s a very rigorous process for making technology safe and secure. Obviously none of that process is happening. The organization responsible for doing that [the U.S. Digital Service] has been gutted and turned into a meme.
As I discuss in the piece, there are systems that are run in parallel between older and newer versions to make sure the same answers are coming out. We’re talking about systems where for years, both systems have been putting out correct data but not shutting down one because of edge cases where the data could be different. Only after years of work, they’ll shut down the older system. When you’re running old and new systems in tandem, you’re incurring both costs. My central terror, although there are a million ones you can pick, is that based on Musk’s history, the redundancies which are the premise of mission-critical IT systems, the premise that this must never fail, he’s going to look at it and say look at this inefficiency. A mission-critical system has to be inefficient because that’s how you make sure it functions all the time. The difference between 97 percent and 100 percent functioning is crucial. It may be inefficiency, but it means making sure that 88 percent of the federal government’s payments are going out all the time reliably.
One of the most interesting factors that you talked about in a piece on Friday is how this could intersect with the debt limit, when the president is faced with multiple contradictory orders. He can’t spend above the debt limit but he can’t stop the flow of payments, so he could sort of legally stop certain payments to keep under the debt ceiling limit. I don’t think it was part of Trump’s plan to exploit the debt limit because he wanted very seriously to abolish it last year, he sees the risk. But in this instance, it could also be an advantage?
At this juncture, I worry that I was far too optimistic in my piece Friday morning. I abandoned that as an issue. We’re dealing with something much more fundamental and much more dire. It seems to me there’s an open question of really needing legal justifications. Maybe there’s an invocation of debt ceiling rhetorically. And they’re talking about debt in general, Musk wants to cut the equivalent of 25 percent of government spending. But taking over the payment system, this has opened the Pandora’s box of focusing on the worst-case scenarios.
If you told me now that the issue would be using the debt ceiling to justify spending cuts, I would breathe such a sigh of relief. That is just a normal five-alarm fire constitutional crisis. Where I’m at right now, from the moment I read the Washington Post reporting on Friday to this moment, I have been filled with unmitigated terror. It’s a major motivation why I spent 20 continuous hours writing this piece. I am filled with terror, and not because of a constitutional crisis of using the debt ceiling to unconstitutionally impound spending.
You’re focused more on the breaking of the payment system.
A complete meltdown of the Treasury payment system, that’s the worst-case scenario of the Social Security checks not going out. I’m also concerned whether they have the idea now or whether they are rooting around and it will occur to them in next however many days, to use the payment system as a trump card to whatever limited checks and balances that there are left. So to me it goes, the system failure is the most, then it goes them realizing their ability to completely paralyze resistance to themselves using this crucial payment artery.
