The Committee on Ways and Means has jurisdiction over federal government borrowing, as well as the Treasury Department’s debt management practices and the debt limit. The Founders vested the power to borrow money exclusively in the Legislative Branch. Since the Founders’ time, Congress has repeatedly exercised that power by authorizing the Executive Branch to borrow funds on the country’s credit subject to limitations on the amount borrowed. Without this delegated authority the Executive has no authority to borrow money on its own.
Under the No Budget No Pay Act, which moved the Senate to pass its first budget in five years, the statutory debt limit of $16.4 trillion will be amended after May 18th to reflect additional borrowing since February 4th. The Federal Government will then resort to what are called “extraordinary measures” to pay obligations. But extraordinary measures only work for so long.
If extraordinary measures are exhausted—a scenario that the President and Congress must work together to avoid—Treasury will not be able to pay all obligations on time. This is because the government currently brings in just sixty cents for every dollar it spends. If the government comes to the limit and lacks other options, Treasury would have access only to daily revenue, which can vary from day to day, to meet obligations as presented for payment. This morning, the Subcommittee on Oversight will hear member views on how the government would operate under these circumstances.
We have with us today five Members of Congress who have proposed legislation related to this issue, and I thank them for taking time to join us today.
In 2011, some media outlets reported that the Obama Administration was planning to announce a strategy to prioritize certain payments over others if faced with this kind of scenario. However, absent congressional instruction it is not clear how or whether Treasury would prioritize payments. To provide instruction, Members of Congress, meanwhile, have introduced legislation that will direct Treasury in its prioritization of payments.
While disagreements between the Executive and Legislative Branches over matters of borrowing and spending are as old as the Republic itself, the government has never failed to pay what it owes. To be clear – it is the shared responsibility of Congress and the President to find a way to pay our bills full and on time. It is also our responsibility to put the country on a fiscal path that leads to a balanced budget and avoids bankrupting our children and grandchildren. Still, it is the responsibility of this Subcommittee to examine current law and consider how the government might operate in the event of a debt crisis.