The Republican-led House of Representatives plans to vote next week on legislation that would allow the US government to borrow above the debt ceiling, in a move meant to stave off default.
But the “Full Faith and Credit Act,” which was adopted in committee last week, would allow the government to borrow above the debt limit for only two types of spending: paying down the debt and funding Social Security.
The US government currently has enough money for another couple of weeks, facing the latest in a series of spending precipices, as Congress and President Barack Obama continue to clash over budget priorities.
Earlier this year, Congress passed a measure which suspended the debt ceiling, currently set at $16.4 trillion dollars, through May 18.
The House Ways and Means Committee, which passed the latest measure, warned in a report Wednesday of the potentially disastrous impact of debt default on the US economy.
Focusing on Social Security — the entitlement program for retirees — and debt interest would help forestall a default if no agreement is reached on raising the congressionally-mandated ceiling, the committee said.
“The consequences of the US government failing to make timely and complete payment on Treasury debt, that is, a default, could be severe,” the committee said.
“A default could push the country back into recession, which would worsen our debt problem, hinder an already stagnant economic recovery and threaten our ability to make any of the payments we owe.”
The US Senate would have to pass the measure if it clears the House and it would have to then be signed into law by President Barack Obama.