By Peter Schroeder - 01/26/11 06:19 PM EST
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 (R-Ohio) called Geithner's warning "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," added 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."
But Treasury officials have dismissed the notion of legislation prioritizing payments on debt as "unworkable."
In a Jan. 21 blog post on the department's website, Deputy 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."
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."
"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.
This post updated at 2:06 pm.