Default At Home FirstFebruary 2, 2011 - by Donny Shaw
This isn’t on the fast track to becoming law, but it’s worth mentioning given its relevance to the debates over the federal budget and the national debt these days. In the last week, Republicans in both the House and Senate have introduced legislation that would require the government to prioritize payments to investors, like China and large financial companies, over the rest of the budget if the statutory debt limit is ever surpassed.
The bill is introduced by Tom McClintock [R, CA-4] in the House (H.R. 421) and by Pat Toomey [R, PA] in the Senate (S. 163). Toomey has also filed his version as an amendment to the FAA bill that is being debated in the Senate this week to try to get a vote on it. Toomey’s version reads:
In the event that the debt of the United States Government, as defined in section 3101 of title 31, United States Code, reaches the statutory limit, the authority of the Department of the Treasury provided in section 3123 of title 31, United States Code, to pay with legal tender the principal and interest on debt held by the public shall take priority over all other obligations incurred by the Government of the United States.
In other words, if the Republicans in the House do not pass a debt limit increase, this bill would automatically enforce a deep domestic austerity program. The guiding idea here is to avoid an international default scenario that could permanently destroy U.S. creditworthiness by, apparently, defaulting instead on legal obligations at home, like Social Security payments and benefits for veterans. Toomey himself noted in a recent op-ed that if his bill was triggered, “projects would be postponed, some vendor payments would be delayed, certain programs would be suspended, and many government employees might be furloughed.”
The Treasury Department has already informed Congress that the debt limit will have to be raised by late March. Historically, these debt limit votes have always been handled by the majority party. However, the Tea Party Caucus is already organizing their members against raising the debt limit, and they’re a large enough group to block the Republicans from passing an increase.
Sen. Toomey is pictured above.