According to reports, the Republican-controlled House is about introduce a bill dubbed as the “Pay China First Act” that was said to reduce the consequences of a U.S. default on its financial obligations once the Congress and President Barack Obama failed to find a way to lift the government’s so-called debt limit later this year, in hopes of saving the government’s credit rating and ability to borrow in order to pay its bills.
As for the bill’s sponsor, Rep. Tom McClintock, R-Calif., it is necessary that credit markets are supremely confident that their loans are secure. However, the democrats argued that the legislation would promise a downgrade of the debt by suggesting the nation would be willing to pay some of its bills and not others.
The legislation was in fact dubbed as the “Pay China First Act” since it prioritizes payments to foreign investors over funding important federal programs such as disability benefits for veterans, soldiers, Medicare and companies that do business with the government.
Meanwhile, the White House has promised to veto the bill if ever it passed the democratic-led Senate approves the same.
In a statement released by the White House regarding the bill, which was quoted below, it noted:
"This bill would threaten the full faith and credit of the United States, cost American jobs, hurt businesses of all sizes, and do damage to the economy. It would cause the nation to default on payments for Medicare, veterans, national security and many other critical priorities. This legislation is unwise, unworkable and unacceptably risky.”
The measure came to light as Washington eyes to another showdown over must-pass legislation to heighten the government’s borrowing cap. So far, the government has reached its current debt limit of $16.4 trillion, but the Congress has already moved in January to allow the Treasury Department to borrow enough money to meet its financial obligations. That unique authority already lasted on May 18, but the government retains the ability to balance its books to buy several more months’ worth of time before facing default.
On July, the GOP leaders had hoped to begin a debt confrontation. Fortunately, the government’s finances are currently doing better than expected and the debt limit may not have to be raised until September or early October.
Apparently, the new bill seeks to direct the Treasury Department to borrow money to pay bondholders and social security recipients in an attempt to keep the said programs solvent.
So as to pass the said measure, supporters of the said bill need to convince the White House that it is more significant that the government will not default on the “sovereign debt” owed to creditors than make payments on other financial obligations, which is obviously going to be a tough task to carry on, speculated by a Los Angeles SSI Lawyer.