The Washington PostDemocracy Dies in Darkness

House GOP to take early step on bill preparing for federal default

The proposal, known as ‘debt prioritization,’ comes as the two parties remain at distant odds over how to resolve their fight over the debt ceiling

Rep. Jason T. Smith (R-Mo.), who is now chairman of the House Ways and Means Committee, speaks to reporters in 2021 with now-Speaker Kevin McCarthy (R-Calif.). Smith's committee announced Tuesday that it will consider a bill to prepare the government for a potential default if Congress and the White House don't agree to raise the debt ceiling. (J. Scott Applewhite/AP)
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As the threat of default looms large over Washington, House Republicans are readying a proposal that would choreograph how the U.S. government would pay its future bills — offering the latest signal of the party’s hardening resolve over an emerging fiscal crisis.

The new measure — set to be considered by a key committee Thursday — aims to ensure the government can service its debts and pay seniors’ Social Security benefits before setting up an elaborate system that would determine which agencies and programs are financed by available federal funds.

The bill reflects Republicans’ political gambit since assuming control of the House this year. The party seeks to secure steep spending cuts by withholding its votes to raise the debt ceiling, which sets the legal limit for how much the government can borrow to pay for spending Congress has already authorized. Lawmakers must raise or suspend the cap by later this year — or risk a fiscal calamity with global implications.

In 2022, more than a quarter of House Republicans supported cuts to entitlement programs. Now, dozens of those same Republicans say cuts are off the table. (Video: JM Rieger/The Washington Post)

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.

The Republican approach essentially would serve as an emergency road map, which GOP leaders say would technically prevent a default. The measure, dubbed the Default Prevention Act, would allow the government to continue borrowing to make payments on existing debt, according to documents obtained by The Washington Post, as party lawmakers look to calm jittery bond markets and protect the country in the event of a fiscal crisis.

From there, Republicans would require the Treasury Department to prioritize some payments over others, including the use of taxpayer dollars to fund the Defense Department and veterans’ benefits. The bill would prohibit salary payments to members of Congress and other executive branch employees.

House Republicans steered to passage a scaled-down version of the legislation in 2015, but that bill never saw a vote in the Senate. Democrats at the time charged that it could entail massive sacrifices, potentially eliminating funding for key programs that protect national security or provide for the poor — simply because the United States could not afford to pay for them.

On Wednesday, the White House reprised its public opposition to the idea: Spokesman Michael Kikukawa said in a statement that 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. Not to put forward half-baked schemes that hurt the American people,” he said.

Adding to the challenge, Brian Riedl, an economist at the Manhattan Institute, said the U.S. government’s computer systems do not have 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 that even then the measure still likely may not address a “bond market panic.”

For now, Republicans are readying the bill for consideration on the House Ways and Means Committee, which could tee up a potential vote in front of the full House. But the GOP’s efforts — fulfilling a commitment that House Speaker Kevin McCarthy (R-Calif.) made to his conservative members earlier this year — still 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, marking the formal start of the annual spending process on Capitol Hill. The president’s blueprint aims to reduce the deficit by $2 trillion over the next decade while shoring up the future of Medicare, with some of the key savings coming from new tax increases targeting wealthy Americans and some corporations.

House GOP takes early swipes at Biden budget before fiscal showdown

Even before the White House could release the document, some Republicans have rejected it outright, arguing it does not go far enough to slash spending — and should not include new tax hikes. Earlier Tuesday, Rep. Jason T. Smith (R-Mo.) convened his tax committee for a field hearing in Yukon, Okla., where he blasted the president for “treating family farms like piggy banks to pay for more welfare for the wealthy.”

GOP leaders plan to present their own competing budget in the coming weeks that is expected to cut as much as $150 billion in the upcoming fiscal year. In doing so, the party has insisted on a spending deal in exchange for raising the debt ceiling, even as they maintain they do not want the country to default.

While Biden has entertained some talk around spending cuts — and even huddled with McCarthy last month in a wide-ranging meeting — the White House has held firm that the president has not, and will not, haggle over the nation’s credit.

“He never came to the table to negotiate. That is not something that occurred,” White House press secretary Karine Jean-Pierre said at her press briefing Monday. “We’ve been very clear, we’re not negotiating around the debt ceiling. This is something Congress needs to do.”

The two sides nevertheless face a rapidly ticking clock: The nonpartisan Congressional Budget Office last month predicted that the United States could run out of special measures to stave off a default between July and September. The Treasury Department began taking those “extraordinary measures” in January, after the government hit the roughly $31 trillion debt ceiling that Congress enacted last year.