House Ways and Means Committee Debates Bill to Prevent Default Over Debt Limit

Representative Jason Smith (R-Mo.) (L), and Representative John Yarmuth (D-Ky.), at a House Committee hearing in Washington on March 29, 2022. Roberto Schmidt/AFP via Getty Images

The House Ways and Means Committee held a markup on March 8 of a bill that would ensure the principal and interest of the U.S. national debt is paid.

The Default Prevention Act comes as the United States is on the brink of defaulting on its obligations.

Treasury Secretary Janet Yellen has warned that the United States could default by early June if the debt ceiling is not raised. The United States has never defaulted.

Both Democrats and Republicans have taken cuts to entitlements, including Social Security and Medicare, off the table.

Stopping Politicians’ Pay

The bill would also prohibit members of Congress from getting paid until the debt ceiling issue is resolved were the debt limit reached. It would also prohibit the Treasury Department from paying the president and the vice president.

Additionally, it would not allow spending on government travel until obligations are met.

“Washington doesn’t have a revenue problem. It has a spending problem,” said Ways and Means Committee Chairman Jason Smith (R-Mo.).

“And Washington hit the limit on what it can borrow.”

Smith acknowledged that the bill is “not a substitute” for the debt limit issue.

Five million Treasury payments are made daily, according to the committee’s ranking member, Rep. Richard Neal (D-Mass.), who blasted the bill as “a sham.”

Prioritizing Payments

An amendment to the bill would require the secretary of the Treasury to issue new debt obligations in the event the debt ceiling is reached.

Those obligations would be exempt from the debt limit in order to pay the principal and interest on debt held by the public and by the Social Security Trust Funds.

The secretary would be prohibited from paying other obligations until those that are for the Department of Defense and for Veterans Affairs benefits are met.

The bill would also authorize the Treasury secretary to issue obligations outside the debt limit in order to meet Social Security and Medicare obligations.

There would be four tiers under the bill in terms of prioritizing which obligations get paid in the event the debt ceiling is reached and therefore debt outside the ceiling is created by the secretary.

All in all, the bill would prevent the United States from defaulting on its debt.

Democrats React

The bill came under fire from Democrats.

Rep. Earl Blumenauer (D-Ore.) pressed committee staffer Shaun Freiman on how the Treasury Department would prioritize which obligations to pay in the event the debt limit is reached considering that, according to the congressman, Treasury makes 1.28 billion payments annually, or 5 million transactions daily.

Freiman said the bill doesn’t address that and he deferred to Smith and Yellen, who are scheduled to appear before the committee on March 10 in the aftermath of the Biden administration releasing its annual budget proposal.

The latest one, which dropped on March 9, is $6.9 trillion.

Numerous Democrats criticized the bill as prioritizing who gets paid first if new debt is created when the debt ceiling is reached.

The bill ultimately passed the committee, 21-17, and will now go to the House floor.

The U.S. national debt is $31 trillion and counting.