Republicans on the House Ways and Means Committee called up legislation Thursday aimed at helping the federal government avoid a catastrophic debt default, even as Democrats charged the bill would fuel “economic chaos.”
The committee convened to discuss the House Republicans’ Default Prevention Act, which would exempt principle and interest payments on the debt and Medicare and Social Security spending from the debt ceiling once the ceiling is reached. The bill is aimed at allowing funding for these major obligations in order to avoid catastrophic results that could occur if a debt ceiling deal can’t be reached.
The discussion took place even as the government is already bumping up against the current $31.4 trillion debt ceiling. The White House and congressional Democrats have thus far refused to negotiate on spending cuts as part of a deal to raise the borrowing limit, something the House GOP majority has insisted on as part of a deal.
With a potential default on the horizon later this year in the absence of a deal, Republicans are promoting the bill as a way to avert financial disaster while keeping federal spending in check.
But Rep. Richard Neal, D-Mass., the ranking member on the panel, called the proposal the “pay China first bill” and claimed it would help Beijing before vulnerable Americans and service members.
“The pay China first bill would make our colleagues responsible for delays in checks to Social Security recipients, put our military at risk, veterans not getting their benefits because they’re in the second tier, banks and small businesses conceivably could collapse without cash flow for credit purposes, jobs disappearing, and more,’ Neal said.
Ways and Means Chairman Jason Smith, R-Mo., blasted those accusations in his opening statement.
“Democrats will argue today that this bill pays China while ignoring the fact that the largest holders of our debt include the Social Security Trust Fund, the Federal Reserve, pension funds of union workers, and the 401(k)’s of millions of retirees,” Smith said, referencing data that show trillions of dollars in recent federal debt was borrowed from domestic sources, not overseas governments. “If they suddenly care so much about China, why not support legislation that prioritizes the national security of American families and make sure our military men and women are paid?”
“Where was the concern out of Washington Democrats over the last two years when they increased spending by $10 trillion and ran up record deficits that made us more beholden to China?” Smith asked.
Under the bill, payments on the public debt, Social Security, Medicare and other benefits would be allowed to keep borrowing even when the debt ceiling is hit. But other programs, such as military and veterans’ funding, congressional salaries and other items are in lower tiered priorities, and would not be allowed to keep borrowing.
Rep. Dwight Evans, D-Pa., claimed the GOP plan would be an ineffective solution to the worsening debt limit crisis.
“The so-called Debt Protection Act would not prevent default from the full faith and credit of the United States. There’s no way for the U.S. Treasury to pay some bills while defaulting on others,” Evans said.
“Debt prioritization is just the default by another name. This will lead to economic chaos,” he said.
But supporters say the bill would allow the Treasury Department to undertake the kind of “extraordinary measures” it uses today to keep these and other programs funded while a debt ceiling deal is reached.
President Biden presented his own budget plan on Thursday for the next fiscal year, which the White House claims would cut the deficit by more than $3 trillion over the next decade.