By Peter Schroeder and Erik Wasson - 01/27/11 01:08 AM EST
Conservative Republicans in the House are upping the pressure on their party leaders to take a firm stand against raising the federal debt ceiling.
The Republican Study Committee (RSC) introduced legislation on Wednesday that it says would allow the Treasury Department to avoid a default on U.S. debt without expanding the borrowing limit.
Treasury Secretary Timothy Geithner warned lawmakers in a Jan. 6 letter of “catastrophic economic consequences” if Congress fails to raise the current $14.3 trillion debt limit, which the government is on pace to hit sometime this spring.
But RSC Chairman Jim Jordan (Ohio) said Geithner’s warning is nothing more than “a pitiful scare tactic.”
“This is government mismanagement at its worst. Secretary Geithner knows full well that he has the authority to prioritize federal spending so that default is not an option,” he said. “This bill will take Secretary Geithner’s disastrous scenario completely off the table.”
The legislation “ensures America’s debt rating and the threat of default on our debt cannot be used as political weapons,” said RSC member and co-sponsor Rep. Scott Garrett (R-N.J.). “This bill will remind the markets and the world that America will never default on its debt while giving Congress time to have a meaningful, reasonable discussion about how to rein in out-of-control spending.”
GOP leaders in the House have pressured the White House to agree to spending cuts in return for approving the debt increase. House Republican leaders are also considering holding a vote on a constitutional balanced-budget amendment in tandem with the debt-ceiling vote.
“Republicans are not going to vote for this increase in the debt limit unless there are serious spending cuts and reforms,” House Minority Leader Eric Cantor (R-Va.) said on NBC’s “Meet the Press” program. “That is just the way it is.”
But despite that rhetoric, Republican leaders have made it clear that the debt ceiling must be raised. After the midterm elections, Speaker John Boehner (R-Ohio) told the incoming class of lawmakers that they would have to deal with the debt-ceiling vote “as adults.”
“Whether we like it or not, the federal government has obligations, and we have obligations on our part,” Boehner said.
The RSC’s legislation could signal that Boehner and his leadership team have a revolt on their hands over the debt-ceiling vote. The RSC, which represents 165 Republican lawmakers, including 73 freshmen, has already bucked the party’s brass on spending cuts, urging it to keep a pledge to cut $100 billion this year despite a shortened budget window.
The RSC’s Full Faith and Credit Act would require the Treasury to pay principal and interest due on public debt before making any other payments. Sen. Pat Toomey (R-Pa.) has introduced companion legislation in the Senate.
Democrats blasted the Republican proposal, saying it prioritizes paying foreign lenders before the American people.
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,’ ” Conrad said.
House Budget Committee ranking member Chris Van Hollen (D-Md.) said the proposal would say that “full faith and credit extends to a lot of foreign countries but not to Americans.”
Treasury officials insist that the only solution to the debt-ceiling problem is another increase, and say any attempt to prioritize payments would be “unworkable” and unacceptable to the American people.
In a Jan. 21 blog post, Deputy Treasury Secretary Neal Wolin said such proposals would not actually prevent default, since the U.S. would still be forced to shirk other legal obligations.
“Adopting a policy that payments to investors should take precedence over other U.S. legal obligations would merely be default by another name, since the world would recognize it as a failure by the U.S. to stand behind its commitments,” wrote Wolin. “It would therefore bring about the same catastrophic economic consequences Secretary Geithner has warned against.
“For these reasons, the Department of Treasury has always emphasized — regardless of which party has held the White House or either house of Congress — that the only way to prevent default and protect America’s creditworthiness is to enact a timely increase in the debt limit,” he wrote.
He added that such proposals would also be “unacceptable” to members of America’s military, retirees and all other Americans “who would rightly reject the notion that their payment has been deemed a lower priority by their government.”
But Treasury’s arguments might not be enough to sway conservative Republicans, who say their legislation is a “common-sense” solution to the debt problem.
“This bill offers a simple safeguard to protect our credit and prevent a sovereign debt crisis. It’s the sort of common-sense solution that we can easily put in place without wading into the debate over raising the debt ceiling,” said Rep. Virginia Foxx (R-N.C).