WASHINGTON (Reuters) - Conservative Republicans are pushing a congressional amendment to give the Treasury Department the ability to avoid a debt default if U.S. borrowing authority runs out, highlighting possible dire consequences of political gridlock over government spending.
The plan by first-term Republican Representative David Schweikert would require Treasury to keep making debt payments if Congress fails in the coming months to raise the limit of the amount the United States can borrow.
“In the event that we reach the debt ceiling, this bill would prohibit a default on our debt, which would rattle already shaky credit markets and spook investors,” Schweikert said.
He added that it would “prioritize debt payments in order to avoid a default on our debt,” much of which is financed in foreign countries like China.
The proposal, which supporters hope will be added to a spending bill in the House of Representatives, has been described by Treasury Secretary Timothy Geithner as ”unworkable.
Geithner on Thursday urged prompt action on raising the debt limit, saying that Washington should not allow financial markets to build in any risk that it will not be raised.
Democrats in Congress say the amendment would put Chinese and other foreign holders of U.S. debt ahead of the U.S. public as Social Security retirement checks, tax refunds and most other government activities would likely grind to a halt if government borrowing authority ran out.
Even if the amendment gets included in the bill in a vote on Thursday night or Friday, Democrats in the Senate are likely to block it.
The Obama administration wants much different legislation that would simply raise borrowing authority from the current $14.3 trillion limit. Doing so, it argues, would allow Washington to continue paying holders of government debt as well as to keep federal programs functioning.
The U.S. Treasury has estimated that the United States will bump up its current ceiling sometime in April or May.
Washington is rapidly coming close to exceeding its debt limit because of huge deficit spending -- in the range of $1.6 trillion just this year -- and Tea Party conservatives have threatened to try to block another increase in borrowing authority until Congress achieves significant spending reductions.
Another conservative initiative to cut off U.S. funding of the landmark healthcare law enacted last year also was expected before the House wraps up work on the fiscal 2011 spending bill sometime Thursday or Friday.
The measure would stop the Obama administration from implementing the healthcare law, which aims to ensure that more Americans get medical insurance and to provide consumer protections in the healthcare industry.
The move to withhold funds is part of a broader attempt by Republicans to repeal the law that they derisively call “Obamacare.”
Even if the House approves these amendments, the Senate is expected to oppose the overall spending bill that Obama has threatened to veto.
Reporting by Richard Cowan and Donna Smith; editing by Mohammad Zargham