That this bill’s passage was inevitable doesn’t make it any less absurd.
The House on Thursday passed legislation that would allow the government to borrow money above the debt ceiling, but only to service U.S. bondholders and make payments related to the Social Security Trust Fund.
The Full Faith and Credit Act, H.R. 807, was passed in a 221-207 vote that saw all but eight Republicans favor the bill, and every Democrat oppose it.
Republicans said the bill creates a necessary option for the government to extend its borrowing ability in the event that it bumps up against the debt ceiling.
Here’s a better idea: don’t bump up against the debt ceiling.
The notion that Congress needs a fallback plan in the event the debt limit is breached makes it seem as if the Full Faith and Credit Act is some kind of insurance policy in the event of an unexpected disaster. So let’s be clear: Congress will know when the nation’s debt limit will need to be increased; it will have plenty of warning; and if it does its duty and meets its obligations, there will be no need for such a ridiculous backup plan.
Indeed, there are three main angles to this. The first is that House Republicans should, if the conference weren’t made up of petulant children, focus on preventing the crisis, not figuring out what should happen in the event of a self-inflicted wound. This is an easily avoidable crisis, but the House has invested several weeks working on a bill – that won’t become law – on the contingency plan to describe what happens if Republicans allow the easily avoidable crisis to happen.
Second, as we discussed yesterday, are the priorities themselves included in the debt-prioritization plan.
In effect, because Congress will have blocked the United States’ ability to borrow the funds necessary to meet our legal obligations, these House Republicans are looking to prioritize who’ll get paid first after the debt limit is breached. Under this radical vision, the nation will start by focusing on our bond holders and debt payments, paying them in full, and then using whatever money is left over to pay for literally everything else.
It’s why Democrats are going with the straightforward attack: Boehner and his party want to pay China before they pay U.S. troops. (For the record, China doesn’t own that much U.S. debt, making the talking point misleading, though the larger point about bond holders vs. domestic obligations is sound.)
For Boehner, this approach to debt prioritization would prevent a default, which is sort of true, but not entirely – the United States has passed laws obligating the government to pay for plenty of other things, and we’d almost certainly have to default on those obligations unless the debt ceiling is raised as it always has been.
And finally, if Boehner & Co. see this ridiculous idea as an attempt to be half-way responsible during a crisis of their own making, they’re fooling themselves.
The nation’s credit rating agencies are wary of a House Republican plan to prioritize payments to U.S. bond holders and Social Security recipients if the debt ceiling is reached…. [T]he credit rating officials said it is not a viable replacement for raising the ceiling, and might not prevent another downgrading of the U.S. credit rating.
Nikola Swann, the primary analyst for the U.S. rating for Standard & Poor’s, pointed out that if a prioritization plan was in place, reaching the $16.4 trillion borrowing limit would still carry potentially huge economic and financial consequences.