Good morning. We are meeting today to consider H.R. 807, the “Full Faith and Credit Act,” introduced by Congressman McClintock earlier this year. I will be offering an amendment in the nature of a substitute to ensure that the United States never defaults on a debt payment.
In February of this year, the President signed into law H.R. 325, the “No Budget, No Pay Act,” which suspended the debt limit until May 19, 2013. House Republicans approved that legislation to allow the President and Congressional Democrats time to join us in proposing credible solutions to rein in Washington’s out-of-control spending. While it forced Senate Democrats to produce their first budget in four years, the result wasn’t pretty. That budget, like the President’s, never balances, fails to address the primary causes of our debt and deficits and simply piles more debt onto the backs of our children and grandchildren.
The rating agency Standard & Poor’s was crystal clear as to why it downgraded the U.S. credit rating. 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, S&P 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.
So, with Washington again about to hit the debt limit, we are still faced with the same old problem – getting Washington’s spending finally under control. While Americans want Washington to start living within its means, they also know the full faith and credit of this country must never be questioned. That’s why the Committee is considering this legislation, which will clearly and credibly remove the threat of default, no matter what Washington does or fails to do.
My amendment does not raise the debt limit. Instead, it requires the Department of Treasury to roll over existing debt by issuing debt outside the limit solely for the purpose of paying principal and interest on our current debt. Importantly, this legislation defines “interest” in a way that requires Treasury to make the interest payments necessary to ensure that Social Security benefits can be paid in full and on time.
The consequences of a U.S. default on a debt payment 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 amendment before the Committee today also removes the potential obstacle of Treasury’s supposed inability to make debt payments before other obligations once the debt limit has been reached. Despite the fact that then-Treasury Secretary Geithner was prepared to prioritize debt payments in the summer of 2011, there has been some confusion as to whether or not the Treasury Secretary had the authority or the ability to enact such a plan. By requiring Treasury to issue debt to make these payments, this legislation provides an ironclad plan to avoid the risk of default going forward.
Some will argue that failure to pay an obligation other than interest or principal on our debt is simply another form of default. However, two major credit rating agencies, Moody’s and Standard and Poor’s, have indicated that they distinguish between failure to make a debt payment and payment on another obligation of the United States. According to those agencies, it is unlikely that a failure to pay an obligation other than debt would prompt a review of the United States’ credit rating.
This legislation also includes an important provision to hold the Administration accountable when using the authority provided to them in the bill. The amendment requires the Secretary of the Treasury to provide a weekly accounting to the Ways and Means and Senate Finance Committees of the amount of principal and interest due and amount of debt issued under this authority. In short, if they try to game the system, Congress and the American people will know.
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. This 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 in Committee today.