A House Republican unveiled legislation Friday aimed at letting the U.S. hit the debt limit without incurring a damaging default.
Rep. Tom McClintock (R-Calif.) introduced Friday the Default Prevention Act, a bill Republicans argue would allow the government to reach the debt limit without causing a catastrophic default that would upend the U.S. economy. The bill has 43 GOP co-sponsors, including many of the House’s most conservative lawmakers.
{mosads}McClintock’s bill would allow the Treasury Department to borrow beyond the statutory borrowing cap, but only to pay off principal and interest on U.S. debt.
Policymakers likely will not need to raise the nation’s borrowing cap until sometime this summer, but McClintock’s bill could be an early indication that Republicans are preparing to demand concessions in exchange for a borrowing boost.
In previous debt limit battles, Democrats have been quick to paint Republicans seeking fiscal concessions as wreckless with the nation’s economy.
They warned that failure to boost the limit would wreak havoc across the global economy and destroy the nation’s credit reputation. And President Obama has refused to negotiate over the borrowing limit in the past, calling the matter too important for haggling.
But Republicans have accused Democrats of exaggerating the matter, and have put forward legislative proposals they say would dampen the most damaging aspects of reaching the borrowing cap.
Republicans have pushed bills in the past that would give the Treasury Department the ability to prioritize payments on U.S. debt and other critical programs using existing cash.
But the Treasury and many outside experts dismissed such workarounds, saying the huge amount of payments the government processes each day would make it impossible to pick out specific payments to pay, while ignoring others.
Furthermore, they argue that even if debt obligations were paid, the U.S. would still be missing payments on a host of other legally owed obligations, which could cause its own damage. The Treasury under Obama has repeatedly stressed that only a debt limit increase is acceptable.
Congress suspended the nation’s borrowing cap until March 15, at which point it will again take effect. At that point, the Treasury Department will need to begin deploying its “extraordinary measures,” which free up cash under the cap to continue making payments on time. Outside experts believe policymakers will need to boost the cap likely sometime in the summer or fall, or risk a default on money owed.