House GOP advances debt ceiling bill

The powerful House Ways and Means Committee on Wednesday approved a bill to prioritize payments once the nation’s debt ceiling is reached.

The bill was reported out on party lines by a vote of 22 to 14. 

{mosads}The $16.7 trillion debt ceiling will come back into effect on May 19 after being suspended earlier this year by Congress. The Republican bill would allow the Treasury Department to continue issuing debt above and beyond the limit just to pay the nation’s bondholders.

Democrats say the bill is a sure sign that House Republicans want to use the debt ceiling to try to force President Obama to slash the budget as they did during the standoff in 2011, and the bill is a way to shield themselves from criticism.

The bill, introduced by Rep. Tom McClintock (R-Calif.) and amended by Chairman Dave Camp (R-Mich.), would also exempt new debt to pay Social Security benefits from the debt ceiling.

“My amendment does not raise the debt limit. Instead, it requires the Department of Treasury to roll over existing debt by issuing debt outside the limit solely for the purpose of paying principle and interest on our current debt. Importantly, this legislation defines ‘interest’ in a way that requires Treasury to make the interest payments necessary to ensure that Social Security benefits can be paid in full and on time,” Camp said at the committee markup.

Camp insisted that the bill would remove the threat of a “default” as lawmakers battle over the budget.

“[T]wo major credit rating agencies, Moody’s and Standard and Poor’s, have indicated that they distinguish between failure to make a debt payment and payment on another obligation of the United States,” he said. “They have said it is unlikely that failure to pay any other obligations would prompt a review of the US. credit rating.”

Camp said Congress must enact deficit reduction that cuts entitlements without raising taxes.

“This Committee has already begun to examine those policies and will continue to do so over the coming months. In the meantime, we must act to make it clear to the American people and the world economy that the U.S. will not default on a debt payment,” he said. 

Democrats shot back that the GOP bill makes a false distinction, and said failing to pay bills to contractors or make other benefit payments will cause an economic crisis. They said Republicans need to simply pass legislation that raises the debt ceiling. 

“The party that prides itself on fiscal responsibility has become the party of fiscal folly, that is what is happening here today,” Rep. Lloyd Doggett (D-Texas) said. 

“Despite the damage inflicted on our economy two years ago, and against the renewed warnings of economists, Republicans are once again steering our nation toward default. Indeed, they are preparing for default. That’s what this bill is all about. Because let’s be clear: prioritization by any name is default,” said Rep. Sander Levin (D-Mich.), the committee’s ranking member.

“This default preparation legislation would allow Treasury to continue paying private bondholders, including Chinese investors, while perhaps having to default on salaries for our troops in harm’s way, medical care for our veterans at home, or payments to American businesses,” he said. 

“This kind of positioning is very dangerous,” Levin said. “This is another nail in the coffin of bipartisanship.”

House Budget Committee Chairman Paul Ryan (R-Wis.) threw his support behind the bill and accused Democrats of clinging to a “default” talking point as an excuse for not cutting spending.

“Cutting spending is not defaulting. Not redeeming a bond is defaulting,” he said. 

“Nobody is talking about brinkmanship on default,” Ryan said.

Republicans signaled that they intend to use the bill to blame the White House if a default occurs. Rep. Tom Price (R-Ga.) said Obama would have to decide which others bills to pay if the debt ceiling is reached.

A committee aide said that the bill does not explicitly authorize new spending, but exempts transfers of funds to pay bond obligations and Social Security payments.

To prevent the administration from “gaming the system,” the bill requires a weekly report from the Treasury Secretary on how the authority is used.

As it stands, Treasury is expected to be able to use “extraordinary measures” to avoid missing any payments until August.

The Ways and Means legislation would push back the date when Treasury is expected to exhaust extraordinary measures, though sources said it is unclear by how much.

This story was updated at 12:39 p.m.