The US House passed a Republican bill along party lines Thursday that lawmakers say would remove the threat of default, while requiring the government to prioritize its debt and pension payments.
The legislation would allow the US Treasury to borrow beyond its legal limit in order to pay down government debt and make Social Security payments, in the event that Congress fails to negotiate a rise of the debt ceiling in the coming weeks.
Although it is likely to be a nonstarter in the Democratically-controlled Senate, and the White House has said it will veto the bill, the measure presages the political battle that will once again pit Republicans against Democrats over the budget and the best way to reduce the US deficit.
The government reached its legal borrowing limit of $16.4 trillion in late December, but Congress passed a law allowing the Treasury to continue borrowing through May 18.
Should no deal be reached by then, the US Treasury would be forced to use “extraordinary measures” to extend the debt limit, but such procedures could be exhausted within a few months.
The House of Representatives adopted the Full Faith and Credit Act by 221-207, with a handful of Republicans dissenting and no Democrats voting in favor.
Senate Budget Committee Chairwoman Patty Murray decried the House vote.
The bill would “put foreign creditors ahead of American seniors, veterans, students and small business owners — and it would do nothing to ease the economic harm and uncertainty caused by a new round of Republican brinksmanship,” she said.
Critics see the measure as a strategic ploy by the Republican leaders to argue that they have done all they can to help avoid a possible US credit default.
Republicans are seeking to force the Obama administration to dramatically cut government spending and reform entitlement benefits like Social Security and Medicare, the health care program for the poor, in exchange for a debt ceiling increase.
Both sides are seeking to avoid a repeat of the disastrous episode of summer 2011, when a strategy of negotiating brinkmanship went sour, ultimately costing the United States its “triple A” credit rating from the Standard and Poor’s agency.