I rise today in support of H.R. 807, the Full Faith and Credit Act.
This legislation credibly and permanently removes the threat of default on a U.S. debt payment and ensures that Social Security benefit payments are paid in full and on time.
The bill is really quite simple: it requires the Treasury Department to issue debt not subject to the statutory limit to make principal and interest payments.
And here are the facts about who holds that debt: American families and businesses hold the overwhelming majority of U.S. debt. Teacher pension funds, individual Americans, our military retirement fund, and the list goes on and on. So by ensuring that Treasury has the ability to honor our debt obligations, we are in fact ensuring Americans will be paid.
This legislation is the first step in protecting our credit rating. Two major credit rating agencies, Standard and Poor’s and Moody’s, have indicated that they differentiate between debt and other payments when determining whether or not to review our credit rating. To that end, this bill specifically addresses the default on U.S. debt obligations that these agencies have identified.
Additionally, Standard and Poor’s was crystal clear as to why it downgraded the U.S. credit rating following the debt negotiations in the summer of 2011. And I quote: “The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics.”
In plain English, they downgraded the U.S. credit rating because we have not addressed the primary drivers of our debt and deficits. It’s nearly two years later, and neither the President nor Congressional Democrats have offered a serious plan that would address the problems that caused the downgrade in the first place. This legislation places that responsibility on the Obama Administration and encourages the President to be more involved with taming our debt, something Republicans have long called for.
Some critics of this legislation have claimed that it opens the door for Treasury to issue new debt for new spending or that it is simply raising the debt limit by another means. This is categorically false. This bill does not increase the debt limit. Instead, under this legislation, Treasury loses the authority to issue debt above the limit if doing so creates any room under the existing debt limit. Treasury may not issue new debt above the statutory limit again until the limit is reached. Additionally, any new debt issued to pay principal and interest is not exempt from the statutory limit unless issuing the new debt would cause Treasury to exceed the statutory limit.
The American people agree – and that support transcends party lines. A majority (55 percent) support requiring the government to pay the principal and interest on the debt before it pays for any other government expenses. Support for the proposal is strong among Republicans (65%) and Independents (53%), while Democratic voters are split evenly between favor (46%) and oppose (47%).
Clearly, we cannot default on our debt. The consequences of doing so could be very serious. A default would at the very least hinder an already stagnant economic recovery, and, in a worst-case scenario, lead the country back into a recession. Failure to make a debt payment will increase our borrowing costs and threaten our ability to make any of the other payments we owe. If signed into law, this legislation would prevent such an unacceptable situation.
The President and Congress must work to reduce the growing burden of our debt and deficits, but we must do so without imposing more tax increases on hardworking families and job creators. There are bipartisan policies that we can enact to reduce wasteful Washington spending and preserve Social Security and Medicare for future generations. The Ways and Means Committee has already begun to examine those policies and will continue to do so over the coming months. In the meantime, we must act to make it clear to the American people and the world economy that the U.S. will not default on a debt payment. The legislation before us accomplishes that important goal, and I would urge my colleagues to join me in voting for its passage today.