WASHINGTON -- The House late Wednesday passed a bill that would prevent the federal government from defaulting on Treasury securities held by investors. Administration officials have warned President Obama would veto it.
The Default Prevention Act (H.R. 692) was passed by a vote of 235 to 194, largely along party lines. The bill now heads to the Senate. That chamber may not take up the measure, and if it does, it is unlikely to pass. The bill does not raise the federal debt limit and comes days before the Nov. 3 date by which the Treasury Department is expected to exhaust the extraordinary measures it’s been using to meet its obligations.
Under the bill, Treasury can issue new debt when the debt limit is reached solely to pay principal and interest on obligations held by the public and the Social Security Trust Funds. This new debt would be exempt from the debt limit and could not be used to compensate members of Congress. Congress would still have to raise the debt limit for Treasury to issue bonds to pay for new spending.
During the debate on the bill on the House floor, House Ways and Means Committee chairman Paul Ryan, R-Wis., urged his colleagues to vote for the bill “if you want to guarantee that the United States will never default.”
The congressman who introduced the bill, Rep. Tom McClintock, R-Calif., said that the bill would “prevent a future debt crisis and get Congress the calm it needs to negotiate the changes that must be made to bring our debt under control as we authorize still more debt.”
But Democrats criticized the legislation and called it the “Pay China First Act,” saying it would guarantee payments to foreign investors but risk payments to active-duty troops, veterans, students and small businesses.
In a statement about the bill’s passage, House Ways and Means Committee ranking minority member Sander Levin, D-Mich., said, “Congress should not even entertain the idea of defaulting on our nation’s debt. Yet, House Republicans have once again advanced a bill that would put our nation’s full faith and credit at risk. Default by any other name is default.”
In warning the bill would be vetoed by the president, Office of Management and Budget officials said, “It would cause the nation to default on payments for Medicare, veterans, national security, and many other key priorities. Making some payments while not making others would be unacceptably risky and unfair to the American people.”
