The Republican-controlled House of Representatives is signaling that it's ready to engage in another round of debt-ceiling brinkmanship. Looking down the road to the next battle over whether to raise the limit, Speaker of the House John Boehner (R-Ohio) has reaffirmed his commitment to the Full Faith and Credit Act, which will likely come to the floor this Wednesday. The act would guarantee continued payments to debt holders in case of a national default.
Similar to a bankruptcy payout scheme for a business, this bill would create a priority of payouts for debtors holding U.S. bonds before paying benefits to veterans, national security priorities, Social Security, or Medicare checks. Democrats charge that this bill is merely prioritizing China, the largest holder of U.S. debt, over veterans and the elderly. President Obama has threatened to veto the legislation.
Arguably, this bill is the Republicans' attempt to decrease the business community’s concerns regarding another battle over the debt ceiling. By securing payment on pre-existing debt, Republicans would hope that a debt-ceiling battle this summer would merely cause chaos in Washington and not on Wall Street.
The Democrats argue that the U.S.’s debt is money that the nation has already spent, thus this bill would do the unthinkable: decide what bills to pay and what bills to slough off. The White House, in a press release, called this bill “default by another name.”
With a midterm election 18 months away, we can only imagine the real purpose of this legislation: to give red meat to the Republican base. It’s the time of the year when political votes begin to happen, with eyes set on framing next year’s election. This vote on the Full Faith and Credit Act will happen alongside another vote to repeal Obamacare.
However, a vote for this bill is a tougher sell in Republican-leaning districts than your run-of-the-mill opposition to Obamacare. A number of districts in Pennsylvania and Ohio have seen jobs outsourced and troops sent to Afghanistan and Iraq. One can already envision the campaign ad of a local congressperson and proponent of this bill shrouded in the Chinese flag as our troops and elderly are seen languishing in the cold.
Further, the bill would prioritize debt holders before national security, a bedrock issue for the Republican base. Democrats could charge that prioritizing Chinese debt holders as China is increasing its cyber attacks against U.S. targets is jeopardizing the country in the name of ideological rigidity. This is a talking point Democratic challengers would be more than happy to have.
While the Full Faith and Credit Act is not likely to become law, we do know that this is foreshadowing for debt ceiling déjà vu. Like in the summer of 2011, the U.S. is scheduled to meet the debt ceiling in August or October of this year. As we rumble towards another self-imposed crisis, perhaps it’s time to stop preparing for default and to start governing responsibly.