WASHINGTON (AP) — As Congress gears up for another fight over the federal debt, House Republicans advanced legislation Thursday to make sure investors in U.S. Treasury bonds get paid even if the government reaches the limit of its borrowing authority.
Social Security recipients would also be protected. But federal workers, retirees, soldiers and veterans would not.
"This bill takes default off the table," said Rep. Paul Ryan, R-Wis. "It requires the Treasury to make good on all debt payments."
Rep. Jim McDermott, D-Wash., asked, "What happens to everybody else?"
Unless Congress acts, the federal government is expected to exhaust its legal ability to borrow in late October, Treasury Secretary Jacob Lew said Thursday in a letter to congressional leaders. The nonpartisan Congressional Budget Office has said the debt limit will be reached in November or December.
It would mark the first time in U.S. history that the government has defaulted on its obligations. But so far, congressional leaders have been mum on plans to avoid it.
The debt limit is just one of several fiscal deadlines facing lawmakers, setting the stage for a crisis-filled autumn in Washington.
The federal government faces a partial shutdown at the end of the month, unless Congress agrees on funding. The authority to finance federal highway programs expires at the end of October, and Congress has until the end of December to extend billions of dollars in temporary tax breaks that expired at the beginning of the year.
On a straight party-line vote, the House Ways and Means Committee passed a bill Thursday that would require the Treasury to continue borrowing money to make principal and interest payments on Treasury bonds, even if the statutory debt limit is reached.
The bill would cover payments to public investors, including foreign governments, as well as payments to Social Security's two trust funds.
The national debt stands at just over $18 trillion. Social Security holds about $2.7 trillion of the debt.
All 24 Republicans on the committee voted in favor of the bill; all 15 Democrats were opposed. The bill now goes to the full House.
Under Democrats and Republicans, Congress has increased the debt limit many times to account for the fact that the federal government spends more money than it collects in taxes and fees. But fights over the debt limit have become more intense in recent years as some Republicans demand spending cuts in exchange for extending the government's ability to borrow.
The White House has refused to negotiate over the debt limit, saying Congress should pay its bills rather than rattle financial markets.
Republican leaders say the bill passed Thursday would enable the government to pay its debts even in the face of political gridlock.
"None of us wants to hit the limit. But if the United States missed a bond payment, it would shake the confidence of the world economy," said Ryan, who chairs the Ways and Means Committee. "All kinds of credit would dry up, loans for small businesses, mortgages for young families. We could even go into a recession."
The federal government's largest employee union criticized the bill because it doesn't ensure the government will meet all its obligations.
"Congress should be focused on avoiding a default that will hurt the economy and individuals, rather than prioritizing paying foreign debt holders over paying salaries for federal employees," said Tony Reardon, president of the National Treasury Employees Union.
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