U.S. Senator Pat Toomey is pushing for quick approval of legislation that seeks to avert a U.S. government default in case Congress doesn’t vote in the coming months to raise the statutory limit on the national debt.
Toomey, a Republican from Pennsylvania who won election in November with Tea Party support, proposed the measure as an amendment to a bill to reauthorize the Federal Aviation Administration, now moving through the Senate.
It’s unlikely the idea will see a vote in the short term. Democrats are opposed, and Republicans have yet to coalesce around a strategy for addressing the looming, politically sensitive vote on increasing the debt ceiling.
Treasury Secretary Timothy Geithner told congressional leaders in a Jan. 6 letter that the U.S. government’s $14.29 trillion debt limit may be reached as soon as March 31 and “most likely” by May 16.
Toomey’s proposal would require that in the event the government reaches its legal debt limit, the Treasury Department first reimburse the holders of U.S. debt before meeting other obligations. The approach is designed to avert a U.S. government default, essentially giving opponents of raising the debt limit more time and leverage to press for cuts in federal spending as a condition of supporting the boost.
“Failing to raise the debt ceiling is not a desirable situation and would be disruptive, but the worst thing we can do is simply continue the irresponsible deficit spending that jeopardizes our economic future,” Toomey said in a statement on his measure.
‘Pay China First’
Democrats have dubbed the proposal the “pay China first” bill, noting that Toomey’s plan would give priority to reimbursing foreign creditors over paying U.S. soldiers or Social Security benefits for the elderly.
U.S. House Speaker John Boehner, an Ohio Republican, said over the weekend that a U.S. default would be a “financial disaster,” telling Fox News that allowing one was “not even on the table.”
White House Chief of Staff William Daley cautioned that a failure by lawmakers to raise the debt limit “would have enormous potential negative impacts” on the financial system.
“To sort of play this typical Washington game of threatening and trying to leverage off the debt would be very dangerous for the markets,” he said at the Bloomberg Breakfast in Washington.