House passes tactical Republican debt bill

WASHINGTON Thu May 9, 2013 12:24pm EDT

U.S. House Speaker John Boehner (R-OH) is pictured as he speaks to the press about U.S. debt reduction talks on Capitol Hill in Washington, July 25, 2011. REUTERS/Jason Reed

U.S. House Speaker John Boehner (R-OH) is pictured as he speaks to the press about U.S. debt reduction talks on Capitol Hill in Washington, July 25, 2011.

Credit: Reuters/Jason Reed

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WASHINGTON (Reuters) - Republicans in the House of Representatives passed a bill on Thursday that would require the Obama administration to prioritize government debt payments and retirement benefits if Congress fails to reach a deal to raise the U.S. debt ceiling.

The legislation is not expected to go anywhere in the Democratic-controlled Senate and the White House has said it will veto the bill, but what is essentially a tactical maneuver will allow the Republicans, who control the House, to argue they have done their best to avoid a potential U.S. credit default.

By the end of next week, the Obama administration will no longer be able to borrow money to fund government operations because Congress has only agreed to extend the government's borrowing authority until May 19.

This will force the U.S. Treasury to start using its limited accounting maneuvers to extend the debt limit but such measures are not permanent and analysts say they could be exhausted by October.

The Republican bill, which passed 221-207 with a few Republicans dissenting and no Democratic support, would allow the U.S. Treasury to borrow more funds to pay the interest and principal on government bonds as well as retirement benefits.

Democrats called it the "pay China first" legislation as the Asian country holds more than $1.2 trillion in U.S. government bonds and is America's largest foreign creditor.

The bill "says we should pay the government of China before we pay our troops, before we pay our veterans, before we pay other bills here in the United States," said Chris Van Hollen, the top Democrat on the House Budget Committee.

But Republicans argued that it would take the threat of default off the table.

"Financial markets ought to be confident that their Treasury bonds are safe, regardless of what political storms are raging in Washington," said Republican Representative Tom McClintock of California, who crafted the original version of the bill.


House Republicans are looking for ways to deal with the debt limit while staying true to House Speaker John Boehner's rule that any debt-cap increase be matched by budget cuts and reforms.

The Republicans have been trying to force the administration to slash government spending and reform Medicare and Social Security benefits in return for an increase in the debt ceiling.

However, with no deal along those lines in sight, some allies of chief Republican tax writer Dave Camp, a representative from Michigan, have floated the idea of linking a debt-limit increase to a revamp of the tax code and lower tax rates.

This would allow lawmakers to skirt the politically painful decisions to cut Medicare and Social Security.

However, it is unclear if mainstream party supporters, much less the conservative faction of the Republican Party, will go along with this.

"It wouldn't be enough," said Kevin Brady, a senior Republican from Texas who is on Camp's tax-writing committee.

He said reform of the Social Security and Medicare benefits programs still would be required.

Camp has been working for more than a year to draft an overhaul of the entire tax code and has vowed repeatedly to move legislation out of his Ways and Means Committee this year.

House Republican are due to hold a meeting next Wednesday to discuss the various options.

(Additional reporting by Kim Dixon; Editing by David Brunnstrom and Bill Trott)

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Comments (12)
Abulafiah wrote:
Summary: Republicans are already starting the blame game.

I hope Republicans do dig in and refuse to raise the debt limit. They may imagine that nobody will notice who it is that is holding the US economy to ransom in an attempt to shove their minority views down the throats of the majority, but people are not that stupid.

This is basically the Republicans using protection racket tactics: “Do as we say or we wreck the USA”

May 09, 2013 7:13am EDT  --  Report as abuse
pdoggt wrote:
Democrats are the ones who forced the very unpopular and extremely expensive Obamacare down the throats of every American even when MOST American didn’t and still don’t want it. Democrats are the ones bankrupting this country while refusing to even consider reforming the most expensive programs of the government. Democrats are the ones who have been causing this economic, cultural, and social mess while taking every opportunity to blame everyone else for it.
Republicans are simply trying to get a very unsustainable spending habit under control before America goes bankrupt and the bottom 99% of the population gets plunged into poverty.
I’m not a republican by any stretch but I have to say democrats are doing a far worse job than republicans could have done if they tried.

May 09, 2013 8:10am EDT  --  Report as abuse
Margaretville wrote:
Boehner and company are fighting a tough battle to bring America’s fiscal house in order. They are opposed by people who believe the U.S. lives off a credit card whose balance can grow without consequences. It is the battle of the sensible and the senseless. Unfortunately there are more of the senseless running around. We need to back Boehner to the max.

May 09, 2013 8:14am EDT  --  Report as abuse
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