House OKs debt limit plan as deadline looms
Washington – — Washington is barreling toward a deadline to raise the government’s borrowing cap and avert a first-ever default on U.S. payments, but there’s no sign yet on Capitol Hill of a viable solution.
Instead, the Republican-controlled House is moving ahead on tea party-blessed legislation related to the debt limit that has no chance of making it through the Senate, much less of being signed by President Barack Obama.
Credit markets are already nervous about the lack of progress as a Nov. 3 Treasury Department deadline looms. That’s when the government’s ability to use accounting steps to pay its bills for veterans, Social Security recipients, federal employees and others will run out and the government would have a small fiscal cushion.
“There is no margin for error,” Treasury Secretary Jacob Lew said Wednesday at a conference sponsored by the Center for American Progress. “After Nov. 3, we cannot borrow any more money. We will be operating on a cash basis. Some days we will have enough cash to pay our bills. Other days we won’t. Going past Nov. 3 is irresponsible.”
The House on Wednesday passed, 235-194, legislation by Rep. Tom McClintock, R-Calif., that would require the government to pay its creditors and Social Security beneficiaries first and exempt those payments from the debt limit if the government runs out of cash. The idea is to preserve the “full faith and credit” of the government, even if there is a fiscal standoff.
“If there is ever any doubt over the security and reliability of the debt owed by this government, the interest rates that lenders change would quickly rise and overwhelm us,” McClintock said.
The White House promises that Obama would veto the bill, which Democrats like Sen. Harry Reid of Nevada have dubbed the “Pay China First Act” since debt payments would get preference over other obligations like salaries for federal workers and the military, Medicare payments to providers, and medical care for veterans and the poor.
And, while Treasury says government payment systems can prioritize debt obligations over other payments, its systems are not built to allow prioritization of payments like Social Security over all others.
The White House has made it clear that any increase in the so-called debt limit must be “clean” of other policies that would make it appear that Obama is negotiating away concessions in exchange for legislation.