New Republican Study head OK with exceeding debt limit

The new head of the conservative Republican Study Committee on Thursday revived an argument from the 2011 debt-ceiling fight that running out of borrowing authority would not be a disaster for the economy.

The RSC argues that once the $16.4 trillion debt ceiling is exceeded, Treasury can choose to pay bondholders while slashing unnecessary spending elsewhere in the government.

RSC Chairman Steve Scalise (R-La.) said Obama should pledge to avoid defaulting on Treasury bond payments once the Treasury Department no longer has the means to avoid exceeding the $16.4 trillion debt ceiling. 

“The fact that we continue hitting the debt ceiling is a symptom of Washington’s spending problem, and hitting the debt ceiling does not immediately trigger a default,” Scalise said. “The Treasury Secretary has an obligation to preserve the credit rating of the United States and should pledge to continue making necessary interest payments to avoid default.  

He said that debt service requires only 10 percent of the $2.5 trillion in revenue the government receives a year.

Critics of the RSC view define “default” more broadly, and say that if the U.S. pays bondholders it will have to withhold Social Security benefits, tax refunds, worker salaries and payments for other essentials once the credit limit is exceeded.

President Obama is calling on Congress to raise the debt limit by trillions of dollars, but the GOP is demanding equal spending cuts for any debt-ceiling increase. Experts expect a “default” widely defined to be necessary as early as Feb. 15.

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