McClintock Explains the Default Prevention Act
Last month, the House of Representatives passed H.R. 692 by Congressman Tom McClintock on a vote of 235 to 194. The legislation guarantees the sovereign debt of the United States Government by authorizing the Treasury Secretary to continue to borrow to pay interest and principle on the debt, even in the event of complete gridlock in Washington.
Congressman McClintock was Friday’s KVML “Newsmaker of the Day” and delivered the following remarks on the House floor:
This bill simply guarantees that the sovereign debt of the United States will be paid in full and on time. Period.
How can that possibly be controversial?
The sovereign debt of the United States is what makes it possible for us to pay all of our other obligations in the era of chronic deficit spending we are now in. This bill provides an absolute guarantee of that credit.
Although the Constitution explicitly commands that the public debt of the United States is not to be questioned, it provides no practical mechanism to achieve this aim. This bill provides that mechanism. It says that whenever we reach the debt limit, the Treasury Secretary can continue to borrow to pay interest and principal on the debt.
It amazes me that many of our friends on the other side of the aisle support loan guarantees to foreign corporations and special interests, but are unwilling to guarantee loans to our own government.
The national debt is now larger than our entire economy and has doubled in the last decade. The interest on that debt is the fastest growing component of the federal budget and threatens to exceed our entire defense budget in just eight years.
If there is ever any doubt over the security and reliability of the debt owed by this government, the rates we pay to service our debt would quickly rise and sink our country in a tidal wave of red ink.
The Default Prevention Act says loudly and clearly to the world that no matter how much we may differ and quarrel here in Washington, the sovereign debt of this nation is guaranteed and their loans to this government are ABSOLUTELY SAFE.
We hear the charge that this would pay debts owed to foreign governments before paying our troops.
Actually, more than half our debt is held by Americans, often in American pension funds. China holds just 7 percent. But whether our loans come from China or Charleston, without the nation’s credit we cannot pay the troops or meet all of our other obligations.
Opponents charge that this is an excuse not to pay our other debts. What nonsense. This maintains the credit necessary to pay our other debts.
Most states guarantee their sovereign debt and have done so for generations. Do our friends actually suggest that any of these states has ever used these guarantees as an excuse not to pay their other bills?
On the contrary, by protecting their credit first, they actually support and maintain their ability to pay for all of their other obligations.
The President contends that this is tantamount to a family saying it would make its house payment but not its car payment. I sure hope he’s getting better economic advice than that.
But let’s continue the analogy. If the family is living on its credit cards as we are, it had better make the minimum payment on its credit card first, or it won’t be able to pay the rest of its bills.
And when that family has to increase its credit limit because it’s spending above its means, it had better have a serious conversation about what’s driving its debt and what to do about it.
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 it authorizes still more debt.
The voices in opposition are the same voices that have cheered the most profligate spending and borrowing in the nation’s history.
It is time we managed our affairs responsibly, and guaranteeing our debt is an important step toward doing so.”
The legislation has moved to the US Senate where no action has been taken. The White House said that President Barack Obama would veto the Default Prevention Act.
The “Newsmaker of the Day” is heard every weekday morning on AM 1450 KVML at 6:45, 7:45 and 8:45 AM.