Sen. Patrick J. Toomey, maintaining a Republican drumbeat for payment “prioritization” in case of a debt limit stalemate, plans to push for a broader version of the House-passed plan to protect holders of Treasury bonds and Social Security beneficiaries.
The Pennsylvania Republican said he disagreed with strong White House opposition to legislation to set top priorities for government payments after this month’s expiration of the debt ceiling extension.
Toomey vowed to push for action on his own alternative to the prioritization proposal (HR 807) that passed the House 221-207 on Thursday. The White House threatened to veto that measure, sponsored by GOP Rep. Tom McClintock of California, which requires the government to cover two priorities: U.S. bondholders, and the Social Security trust funds, which hold Treasury bonds.
Toomey’s bill would go beyond that by including military salaries and making the guarantee of Social Security payments to beneficiaries explicit.
“I think we should do it,” Toomey said. “I like my version better. I think it would be constructive.”
The GOP moves in the House and Senate are aimed at minimizing Wall Street concerns about a default in case of an impasse — and at taking leverage away from Democrats who pointed to mounting worries in the business world during the 2011 showdown over the debt ceiling.
The congressional debates are going on, however, as the deadline for action on the debt limit appears to be receding. The current suspension of the debt limit expires May 18. But private budget analysts say a rapidly improving deficit picture, along with a $59.4 billion payment to the government next month from Fannie Mae, will help Treasury stave off the need for new borrowing authority at least into the fall.
Treasury Secretary Jacob J. Lew confirmed in an interview Friday with CNBC that the deadline for new borrowing authority is slipping.
“We’re not going to hit the effective deadline until at least Labor Day,” Lew said. “The statutory debt limit will be reached just a few days when it expires on May 18, but because of the extraordinary measures that are available, and the cash flow that we now can predict, it will be not until at least after Labor Day.”
Toomey said he would press for action on his prioritization plan as a stand-alone measure or an amendment to other legislation. He said it would be similar to his earlier proposed mandate (S 46) for payment of three items: U.S. bond principal and interest, Social Security benefits and active-duty military pay.
“I haven’t decided exactly what our process is, but we’re going to pursue it,” Toomey said.
The debt prioritization issue looms as a tough partisan battle on the Senate floor. The Toomey bill has 28 co-sponsors, all Republicans, including Minority Whip John Cornyn of Texas and Orrin G. Hatch of Utah, ranking member of the Finance Committee.
Even if the measure is not approved, Republicans hope to score political points by forcing Democrats to vote against protections for popular items. Democrats portray the bill as a largely symbolic promise that sets the stage for a replay of the 2011 debt limit crisis that led to a downgrade of the nation’s credit rating.
Minutes after the House passage of the measure, Reid and Budget Chairwoman Patty Murray of Washington held a news conference to attack the bill and renew a call for budget conference negotiations.
“If that legislation were used in a model government class in the eighth grade it would get an F. So shallow: It would put the full faith and credit of the United States in jeopardy, and they know that,” Reid said.
Murray charged Republicans with “playing games” on the debt limit and said they were “debating how they’re going to create the next crisis that this country is going to have to face down. I just think that’s the wrong approach.”
The House proposal passed with all Republican votes. Democrats portrayed the measure as a guarantee that would protect Chinese investors, who hold a large share of the federal debt, and leave unprotected recipients of a number of government benefits. Eight Republicans, mainly from the party’s moderate wing, sided with Democrats in voting “no.”
In hopes of wooing moderates in both parties, Toomey and his allies include explicit guarantees for military salaries and Social Security. Some Republicans, such as Rep. Daniel Webster of Florida, argue for more guarantees, for example, for national security and Medicare.
Unlike the Toomey measure, the House bill is structured as an investor shield. Some conservatives argued against expanding McClintock’s original bondholder guarantee to include promises of benefit payments to Social Security recipients. With such concerns in mind, Ways and Means Chairman Dave Camp of Michigan amended the bill to provide a guarantee for Social Security trust funds, which invest in daily special-issue Treasury bonds that are redeemed at face value.
Although the House bill makes no explicit mention of benefits, Paul N. Van de Water, a senior fellow for the Center on Budget and Policy Priorities, a liberal think tank, said it would ensure the mailing of Social Security checks.
“I don’t see why any administration would interpret it differently,” Van de Water said.