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senate Bill S. 623

If the Debt Limit is Reached, Should the Treasury Keep Borrowing to Meet Certain Obligations?

Argument in favor

Failing to service the national debt and defaulting could trigger a debt spiral that damages the entire U.S. economy. Reneging on Social Security & Medicare would harm vulnerable populations. This bill will prevent that kind of disaster.

jimK's Opinion
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08/05/2019
My heart says no, but with the trump’s brinksmanship negotiations and the unwillingness of the Senate to control him, I have to say yes. A default on servicing our National debt would be very bad for our country and really for all of us. Any further loss of faith in our countries credit worthiness could long term, non recoverable, and dire consequences for all of us. Many of the country’s ‘Trust’ funds were made part of the overall budget under Reagan to claim a balanced budget- and those funds may be inaccessible even though they are still ‘Trusts’. So people barely able to survive with Social Security would be put in extreme risk, as would VA beneficiaries and Medicare recipients. None of these people should have to suffer due to Congressional/Presidential inability to reach compromise. As much as I hate it, this legislation is necessary until we get big boys back in control of our government.
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davidf's Opinion
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08/04/2019
Stupid question. Social Security and Medicare should not be at risk as these are Trust Funds separate from the Federal budget, that is, unless, the government is raiding these funds to cover their bills, which they have done before. If Congress doesn’t pass a budget they will just pass a Continuing Resolution. There’s always the possibility of political posturing, brinksmanship, Trump changing his mind, or other ways of achieving another government shutdown.
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Linda's Opinion
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08/05/2019
If you decide to go out to dinner and enjoy a good meal, do you think you can refuse to pay the bill without consequences? Once we have spent what Congress has authorized, we MUST pay the bill. The time to reduce spending is BEFORE we spend!
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Argument opposed

This bill lowers expectations by planning for Congress to fail to raise the debt limit. Lawmakers should focus on a solution rather than preparing a backup plan in case they fail to do what they need to.

burrkitty's Opinion
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08/05/2019
End the SEVEN unauthorized wars, bring troops home, and close 900 of the ~1200 overseas bases. Pin DOD spending at 2% of the GDP without a congressionally declared war with another country. Lo’ a trillion dollars annual is freed up and without cutting service or raising taxes. Win Win. HOORAY!
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I.Got.an.Idea...'s Opinion
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08/05/2019
If the debt limit is reached, continue to cut the Military budget until it is secured. End of story.
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Deirdre 's Opinion
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08/04/2019
What is the point of a limit if you continue to borrow
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What is Senate Bill S. 623?

This bill — known as the Default Prevention Act — would prioritize the federal government’s spending obligations in the event that the debt limit is reached as tax revenue comes in. Priorities would be as follows: 1) paying the interest and principal on the national debt to avoid default; 2) pay and benefits for active duty military personnel; 3) Social Security benefits, including survivors and disability insurance benefits; 4) Medicare benefits; 5) obligations from programs administered by the Dept. of Veterans Affairs (VA).

The Treasury Dept. would be authorized to use its extraordinary measures, including bridge loans of 30 days or less, and to continue issuing debt to meet the above obligations.

Impact

Taxpayers; members of the military; beneficiaries of Social Security, Medicare, and VA programs; and the Treasury Dept.

Cost of Senate Bill S. 623

A CBO cost estimate is unavailable.

More Information

In-Depth: Sponsoring Sen. Rand Paul (R-KY) reintroduced this bill from the 115th Congress to prevent a default whenever the U.S. reaches its debt limit and prioritize spending as revenue comes in

“Once again, Washington’s bipartisan spending addiction has been exposed. Despite the debt’s added burdens on Americans and clear threat to our national security, politicians will attempt to use the threat of default to dodge accountability and a legitimate debate on fiscal responsibility. My plan removes that excuse while ensuring we honor our obligations."

In the 114th Congress, Sen. Paul introduced this bill to prevent the U.S. from defaulting on its debt if Congress fails to raise the debt ceiling, and offered the following statement when he authored this legislation’s predecessor:

“My legislation takes the possibility of default off the table so we can continue to push for fiscal restraint. There is no reason the government would — or should — responsibly consider the idea of default.”

Americans for Tax Reform (ATR) expressed its support for this bill in the 114th Congress, writing: 

"This important legislation protects the full faith and credit of the United States by guaranteeing that the Treasury department will continue paying off debt in the event the debt ceiling is reached. ATR supports the Default Prevention Act and urges all members to Congress to vote for this legislation. Currently, if the debt ceiling is reached the United States Treasury is unable to continue making payments to its debtors. Unfortunately, in recent years this has led to politicians threatening default as a political tactic to evade seriously addressing the nation's fiscal crisis. [This bill] will put a stop to this by ensuring that Treasury can continue to borrow above the set limit to pay principal and interest due on the debt under the event the debt ceiling is reached. By removing the treat of default, this legislation encourages stakeholders to engage in a reasoned and productive conversation to rein in the nation's debt."

Democrats uniformly opposed this bill when it came to a vote in the Senate Ways and Means Committee in the 114th Congress. At that time, Ranking Member Sander Levin (D-MI) argued that prioritization is "default by another name." Neil Buchanan and law professor and author of a paper on debt ceiling fights, argued that this was a plan to "pay the rich and foreigners firstand play politics with everyone else through "meaningless relabeling" of defaults, which could still happen to any budget priorities outside those listed in this bill. Because of this, Buchanan argued

"Refusing to use the word default would obviously be cold comfort for the people and businesses that would be stiffed. Beyond that, however, the very concern that the Republicans’ webpage [in favor of this bill] raises—a default causing 'a credit rating review, weaken[ing] the economy, and tarnish[ing] our economic standing in the world'—would also happen were we to commit default by some other name. Lenders do not only look at whether they are being paid, but they also carefully assess whether borrowers are defaulting on any other obligations. Although holders of the government’s debt would surely be relieved to know that they are currently at the top of the queue, the idea that financial markets would not question our overall creditworthiness (and would not wonder how long they will be protected from such nonsense) is fanciful. Such an unprecedented failure to meet our clear legal obligations would most definitely weaken the economy and tarnish this country’s standing in the world."

On the issue of prioritization, the Brookings Institution sided with Democrats and Buchanan, noting

"[L]ogistically, prioritization would be a dicey proposition; legally, it has no basis and would thus be (or at least seem) deeply arbitrary; constitutionally, it is a monstrosity for Congress to pass a set of mutually inconsistent laws and then expect the President to just sort it all out somehow. To the extent that the Default Prevention Act codifies the idea of prioritization, then, it seems like a bad idea."

This bill doesn't have any cosponsors in the 116th Congress. In the 115th Congress, this bill also didn't have any Senate cosponsors and didn't see committee action. A House companion bill in the 115th Congress, sponsored by Rep. Tom McClintock (R-CA), had 89 Republican House cosponsors and also didn't receive a committee vote.


Of NoteThe term ‘debt held by the public’ refers to individuals, companies, state or local governments, Federal Reserve Banks, and foreign governments that own federal debt securities like bonds, T-bills, TIPS, savings bonds. Currently, debt held by the public accounts for about $13 trillion of the total national debt, which exceeds $18 trillion.

Once a country defaults on its sovereign debt, there is a risk of a debt spiral beginning. A debt spiral happens when interest rates on the country’s debt securities rise because of a default, which means that the government has to spend more money servicing its debt. In the absence of economic growth and increased tax revenue, this requires the government to issue more debt simply to service existing debt.


Media:

Summary by Eric Revell

(Photo Credit: iStockphoto.com / rrodrickbeiler)

AKA

Default Prevention Act

Official Title

A bill to provide guidance and priorities for Federal Government obligations in the event that the debt limit is reached and to provide a limited and temporary authority to exceed the debt limit for priority obligations.

bill Progress


  • Not enacted
    The President has not signed this bill
  • The house has not voted
  • The senate has not voted
      senate Committees
      Committee on Finance
    IntroducedFebruary 28th, 2019
    My heart says no, but with the trump’s brinksmanship negotiations and the unwillingness of the Senate to control him, I have to say yes. A default on servicing our National debt would be very bad for our country and really for all of us. Any further loss of faith in our countries credit worthiness could long term, non recoverable, and dire consequences for all of us. Many of the country’s ‘Trust’ funds were made part of the overall budget under Reagan to claim a balanced budget- and those funds may be inaccessible even though they are still ‘Trusts’. So people barely able to survive with Social Security would be put in extreme risk, as would VA beneficiaries and Medicare recipients. None of these people should have to suffer due to Congressional/Presidential inability to reach compromise. As much as I hate it, this legislation is necessary until we get big boys back in control of our government.
    Like (65)
    Follow
    Share
    End the SEVEN unauthorized wars, bring troops home, and close 900 of the ~1200 overseas bases. Pin DOD spending at 2% of the GDP without a congressionally declared war with another country. Lo’ a trillion dollars annual is freed up and without cutting service or raising taxes. Win Win. HOORAY!
    Like (72)
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    Share
    Where are the so-called fiscal conservatives? GOP liars and hypocrites are aiming to destroy our nation and our economy and strip USA of leadership in world affairs. Beyond deplorable. I can see where Rand Paul is coming from on this - he presents this as lesser of two evils. What a terrible situation to be in - USA. We need a new, sane, sensible government. Remove trump and trump’s corrupt criminal regime- NOW!
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    Stupid question. Social Security and Medicare should not be at risk as these are Trust Funds separate from the Federal budget, that is, unless, the government is raiding these funds to cover their bills, which they have done before. If Congress doesn’t pass a budget they will just pass a Continuing Resolution. There’s always the possibility of political posturing, brinksmanship, Trump changing his mind, or other ways of achieving another government shutdown.
    Like (24)
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    If the debt limit is reached, continue to cut the Military budget until it is secured. End of story.
    Like (16)
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    What is the point of a limit if you continue to borrow
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    Why💋 I am pretty sure we could fund a small country, or at least eliminate much of the poverty in Detroit, by simply requiring all elected officials to pay their own travel tab. The Democrats world vacation tour needs to stop. And I am NOT buying the excuse of a poor me... That wasn't a vacation... Oh no...that was a miscaptioned photo and I was really, really, was on ’official’ business. Nor, am I buying that the whole Italy layover wasn't a vacation.... it was honestly..... just a stopover for an important caucus meeting. There is literally nothing in your congressional duties that specifies the need for international travel on the tax-payers’ dime. ❌You are not the voice of the people of Ghana -❌you are not even the voice of the nation- ✅ you are the voice of the district that elected you! ———— 💣Federal tax and spending policies are worsening the problem of economic inequality. 💣But the tax breaks that overwhelmingly benefit the wealthy are only part of the challenge. 💣The increasing diversion of government spending toward income supports and away from opportunity-building programs also is undermining social comity and, ironically, locking in wealth inequality. Many flawed tax policies are rooted in the ability of affluent households to delay or even avoid tax on the returns from their wealth. By putting off the sale of assets, wealth holders can avoid tax on capital gains that are accrued but not realized. At death, deferred and unrecognized capital gains are exempted from income tax altogether because heirs reset the basis of the assets to their value on the date of death. While individuals and corporations recognize taxable gains only when they sell assets, they may immediately deduct interest and other expenses. This tax arbitrage makes possible everything from tax shelters to the low taxation of the earnings of multinational companies. Recent changes in the law have further eroded taxes on wealth. Once, the US taxed capital income at higher rates than labor income, today it does the reverse. For instance, the 2017 tax law sharply lowered the top corporate rate from 35 percent to 21 percent, but trimmed the top individual statutory rate on labor earnings only from 39.6 percent to 37 percent. In theory, low- and middle-income taxpayers could use these wealth building tools as well. But the data suggest that the path to wealth accumulation eludes most of them, partly because they save only a small share of their income. Even those who do save $100,000 or $200,000 in home equity or in a retirement account earning, say, 5 percent per year may never reap more than $1,000 or so in tax savings annually.
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    Pull it from the industrial military welfare system if you run out of funds. Like all citizens sometimes you need cut back.
    Like (9)
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    How many businesses did trump drive into bankruptcy? Who didn’t see this coming?
    Like (7)
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    Get rid of the debt limit and stop creating manufactured crises!
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    Cut 40 billion from our bloated military budget, we would still be spending more than all the military budgets in the world and we’d be able to cover bills owed. Stop the spending. No more golf outings at Mar-a-lago. #impeachindictimprison
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    It is time to start making cuts! Are Congress men and women should have their allowances travel and wages CUT! Since they care more about illegals go and run for office there. You do not care about US citizens! Cut social programs! Education back to states! Get out of student loans! Smaller government is what we need!
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    No! And Hell No! Does that answer your Question! My check book is balanced why cannot my state and federal governments do the same! I do not borrow money! If I don’t have it then tighten the belt!
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    If you decide to go out to dinner and enjoy a good meal, do you think you can refuse to pay the bill without consequences? Once we have spent what Congress has authorized, we MUST pay the bill. The time to reduce spending is BEFORE we spend!
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    Yes
    Like (5)
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    Our national debt, and deficit spending must be addressed. Better sooner, than later. Rising taxes is not acceptable. We have a spending issue. Make the cuts before we go into total crisis.
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    Cut spending.
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    Like everyone else. Govt should learn about balancing a budget.
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    Tighten the belts of the billionaires. Tax them! Get donations from them whatever it takes for them to get a contribution from THEM. Take money from the military obscene budget! Do not raise the debt to meet your obligations to the tax payers!! It is your responsibility to be financially responsible!!! Do it! Don’t touch the safe guard programs for the disenfranchised peoples of these United States. Enough of your disrespect of those who trusted you to lead and enrich life for all!!! Get that criminal racist gasbag out of the White House and take all the other criminals with him.
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    Overspending isn’t the Republican/Conservative way.
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