Mother Lode Congressman Tom McClintock touted his new “Default Prevention Act” on the house floor earlier this week.
McClintock says the country’s credit should not hang in the balance every time there is a fiscal debate in Washington. In his remarks, he says, “It simply provides that if the debt limit is reached, the Treasury Secretary may continue to borrow above that limit for the sole purpose of paying principle and interest that is due. It is an absolute guarantee that the debt of the United States will be honored.”
Here is McClintock’s entire statement given on the house floor on Tuesday:
Amidst all the controversies gripping Congress, certainly we should all be able to agree that the full faith and credit of the United States should not hang in the balance every time there’s a fiscal debate in Washington.
This nation now staggers under $18 trillion of debt – nearly $7 1/2 trillion run up by this administration alone. The interest on that debt is one of the fastest growing components of the federal budget.
If there is ever any doubt over the security and reliability of the debt owed by this government, rates would quickly rise and our precarious budget situation could rapidly spin out of control.
Ernest Hemingway put it this way. He asked, “How do you go bankrupt? Two ways. First gradually. Then suddenly.” So it is with nations.
The debt limit is how we regulate the nation’s debt. It is the national equivalent of a credit card limit. That limit must be periodically adjusted. It is appropriate for Congress to take responsibility when it is raised. When it does, it is also appropriate for Congress to review and revise the policies that are driving the debt.
The fundamental problem, under both Democratic and Republican Congresses, is that this process is fraught with controversy. The bigger the debt, the bigger the controversy. And the bigger the controversy, the more credit markets are likely to be spooked into demanding higher interest payments to meet their greater risk. Given the size of our debt, that could produce an interest tidal wave that could sink our budget and our nation along with it.
I am today introducing the Default Prevention Act, with 43 co-sponsors, to guarantee that the sovereign debt of the United States Government will be paid in full and on time, under any circumstances — even total political gridlock.
It simply provides that if the debt limit is reached, the Treasury Secretary may continue to borrow above that limit for the sole purpose of paying principle and interest that is due. It is an absolute guarantee that the debt of the United States will be honored.
Most states have various laws to guarantee payment of their debts. Three years ago, in testimony to the Senate, Ben Bernanke praised these state provisions for maintaining confidence in their bonds.
This act passed the House in the 113th Congress, but was never taken up by the Senate.
Now we are approaching the expiration of the government’s current borrowing authority. We will soon have serious discussions over the level of our debt and additional measures to bring that debt under control. We all hope these discussions will go smoothly, but we all know that sometimes they do not.
The Default Prevention Act says loudly and clearly to the world that no matter how much we may differ and quarrel, the sovereign debt of this nation is guaranteed and their loans to this government are ABSOLUTELY SAFE.
Last session, the Democrats opposed this measure, charging that it is an excuse for not paying our other bills.
Do they actually suggest that all these other states — that have guaranteed their sovereign debts for generations — have ever used these guarantees as an excuse not to pay their other bills?
On the contrary, by providing clear and unambiguous mandates to protect their credit first, they actually support and maintain their ability to pay for all of their other obligations.
The most outrageous claim the Democrats made was that this measure “Paid China First.”
What nonsense! More than half our debt is held by Americans, often in American pension funds. This act actually protects Americans far more than the Chinese or other foreign investors.
But whether our loans come from China or Timbuktu – from Grandma’s Pension Fund or Johnny’s Savings Bond – without the nation’s credit we cannot meet any of our other obligations.
Principled disputes over HOW the debt limit is addressed are going to happen from time to time. Just a few years ago, then-Senator Barack Obama vigorously opposed an increase in the debt limit sought by the Bush administration.
When these controversies erupt – as they inevitably do in a free society – it is imperative that credit markets are supremely confident that their loans to the United States are secure.
Providing such a guarantee could prevent a future debt crisis and give Congress the calm it needs to negotiate the changes that must be made to bring our debt under control before authorizing still more debt.
I urge its speedy consideration.