Dem Conrad: GOP debt-limit proposal a 'very, very bad idea'

Democrats blasted a new Republican proposal to work around the statutory debt limit, saying it prioritizes paying foreign lenders before the American people.

On Wednesday, members of the House Republican Study Committee (RSC), introduced a bill that would require the Treasury to pay principal and interest due on public debt before making any other payments. Companion legislation has been introduced in the Senate by Sen. Pat Toomey (R-Penn.).

But Senate Budget Committee Chairman Kent Conrad (D-N.D.) said the proposal is a "very, very bad idea."

"What they are saying is, 'Pay the Chinese first,'" he said.

And House Budget Committee ranking member Chris Van Hollen (D-Md.) said the proposal would say "the full faith and credit extends to a lot of foreign countries but not to Americans."

Administration officials have warned Congress that the current statutory debt limit will likely be reached by the government sometime this spring. If the $14.3 trillion cap is not increased before then, there could be "catastrophic economic consequences" for the national and global economies, according to a Jan. 6 letter sent to lawmakers by Treasury Secretary Timothy Geithner.

However, RSC Chairman Jim Jordan (R-Ohio) dismissed the dire tone, calling Geithner's letter "a pitiful scare tactic."

Treasury officials say the only way to keep America's credit intact is to increase the limit across the board, and any attempts to work around that would not be feasible.