House GOP moving bill to prepare for default

WASHINGTON — House Republicans are readying a proposal that would prepare the U.S. government in the event of a default as GOP leaders and the White House remain at distant odds over the fate of the debt ceiling.

The House Ways and Means Committee, led by Rep. Jason T. Smith, R-Mo., announced the panel will consider a measure Thursday to prioritize some federal payments over others, arguing it would protect U.S. credit if the two parties cannot reach a deal over the country’s ability to borrow to pay its bills.

The debt ceiling sets the legal limit for how much the government can borrow to pay for spending Congress has already authorized, and lawmakers must raise or suspend the cap by later this year — or risk a fiscal calamity with global implications.

Republicans have seized on the urgent task to try to secure steep spending cuts from the White House, an approach that has drawn President Biden’s ire over the risks it poses to the U.S. economy.

A default could cost the United States millions of jobs, plunge the nation into a recession and rattle markets around the world, according to federal officials and top economists. And it would force the sprawling government to make unprecedented, difficult decisions about the programs to sustain, since Washington runs an annual deficit that totaled $1.4 trillion in the 2022 fiscal year.

Under an early version of the legislation, dubbed the Default Prevention Act, the GOP proposal would allow the government to continue borrowing to make payments on existing debt and issue benefit checks to seniors on Social Security. An updated version circulated later Wednesday sets up a system of tiers to prioritize other payments, including on defense and care for veterans, before others. In the meantime, it would bar members of Congress from receiving salaries during such a fiscal crisis.

House Republicans steered to passage a version of the legislation in 2015, arguing the measure could calm jittery markets and protect the country’s full faith and credit in the event of a crisis. But that bill never got a vote in the Senate. Democrats at the time charged it could entail massive sacrifices, potentially eliminating funding for key programs that protect national security or provide for the poor.

On Wednesday, the White House repeated its public opposition to the idea. Spokesman Michael Kikukawa said in a statement the GOP measure puts “wealthy, foreign bondholders — including billionaires and banks in China — over working Americans.” He added it would threaten funding for a wide range of people who depend on government, from people with disabilities who receive Medicaid to military service-members, veterans, teachers and students.

“The only way to avoid this kind of economic disaster is for Congress to do its job and prevent default ,” he said.

Adding to the challenge, Brian Riedl, an economist at the Manhattan Institute, said the U.S. government’s computer systems lack the technology to implement the system and prioritize payments.

“Unless they can build a new system in the next four months, it doesn’t matter,” he said, adding even then the measure still likely may not address a “bond market panic.”

For now, Republicans are readying the bill for committee consideration, known as a markup, which sets the stage for a potential vote in front of the full House. The GOP’s efforts — fulfilling a commitment House Speaker Kevin McCarthy, R-Calif., made to his conservative members earlier this year — highlights the stakes if the two parties cannot come to a deal soon.

The announcement comes a day before Biden is set to release his budget for the 2024 fiscal year.