House Ways and Means Committee
April 10, 2013
Remarks by Congressman Tom McClintock
Most people would agree that the “full faith and credit” of the United States should not hang in the balance every time there’s a fiscal debate in Washington. Even with record deficits, our revenues are roughly ten times greater than our public debt service, so there is no excuse for a debt default.
HR 807 will strengthen and protect our nation’s credit by assuring that debt service has first call on incoming revenues.
This is not a radical suggestion. The Government Accountability Office has consistently held that the Treasury Secretary already has “the authority to choose the order in which to pay obligations of the United States” to protect the nation’s credit. Indeed, such authority is inherent in the 1789 act that established the Treasury Department and entrusted it with the “management of the revenue” and the “support of public credit.” This measure simply restates that authority and requires the Treasury Secretary to use it to protect the nation’s credit.
Most states have similar laws to assure debt service is paid first. Last year in testimony to the Senate, Fed Chairman Ben Bernanke praised these state provisions for maintaining confidence in state and municipal markets and he told the House Budget Committee that a similar measure at the federal level would help to protect against a default.
Is this a tacit suggestion that we shouldn’t meet our other obligations? Does anyone suggest that all the states that have had similar provisions in their Constitutions and statutes for hundreds of years have ever used them as an excuse not to pay their other bills? Of course not.
On the contrary, Mr. Chairman, these provisions to protect their credit first actually supports and maintains their ability to pay all their other obligations in the event of a deficit. Think about it this way: when you’re depending on your credit cards to pay your bills, you had better make sure to make the minimum credit card payment first.
Some say we should include other top priorities like Social Security or payments to our troops. The problem is, once we start down that road, we run out of money before we run out of worthy programs and Congress should not try to micro-manage this process.
More importantly, the fact is that the public credit supports Social Security AND payments to troops AND all those other obligations and this legislation ought to be focused on this central and fundamental imperative: to protect the public credit. Beyond that, we should leave it to the Treasury Secretary to set priorities according to the demands of the times.
Opponents have said that this would put repaying China ahead of paying Grandma’s Social Security. But more than half of the debt held by the public is held by Americans (including Grandma’s pension fund). China holds just eleven percent. Thus, this bill overwhelmingly protects American debt holders, and assures that American pension funds won’t be undermined in the event of a temporary fiscal stalemate in Washington.
This is not an endorsement of a prolonged impasse over the debt limit or funding bills. Postponing the prompt payment of all of the government’s bills would be unprecedented and dangerous. Although existing revenues could support critical government responsibilities for a while, distress to other federal employees and contractors would be severe, would rapidly compound, and would eventually threaten core governmental functions. The only worse fiscal outcome would be to fail to honor the nation’s debt obligations, and that’s what this bill would prevent.
We should remember that if the Full Faith and Credit of the United States is ever compromised, all programs are jeopardized. We must recognize that today our country is divided over fiscal policy and that protracted disputes in Congress are likely to continue for some time. Financial markets ought to be confident that their Treasury bonds are safe regardless of what political storms are raging in Washington.
This measure does so.
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Congressman McClintock introduced H.R. 807 on February 25, 2013 in the 113th Congress. He discussed the legislation, and delivered these remarks, at an April 10th hearing of the House Ways and Means Committee held to examine debt limit issues.