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Dodging default: Will America's credit rating collapse?

 

U.S. Capitol (Photo: House.gov web page of Rep. John Katko, R-N.Y.)

House Republicans passed legislation Wednesday to ensure debt payment on the national debt would go forward in the event the debt ceiling is not raised in the coming days, but the chief sponsor says President Obama and Democrats refuse to embrace that protection of the U.S. credit rating and will not take steps to rein the government’s insatiable spending.

In a vote largely along party lines, the House approved the Default Protection Act. Rep. Tom McClintock, R-Calif., the lead sponsor of the bill, said this one-page measure could save the United States from financial misery if Congress and the president cannot find common ground on the debt ceiling.

“It simply guarantees the sovereign debt of the United States will be paid in full and on time, regardless of what differences and quarrels we are engaged in in Washington,” McClintock said.

Noting that the U.S. national debt now exceeds the size of its economy, McClintock said protecting the credit rating of the United States is essential and more difficult as the debt soars.

“When people lend you money, they generally like you to pay it back,” he said. “Until you do, they like you to pay interest on that. If there is any doubt that the full faith and credit of the United States will be honored, the interest that is charged to us for borrowing could go up. It could spike. Given the amount of debt we’re carrying, that would be absolutely catastrophic.”

The congressman said even at current, record-low interest rates, the amount of money spent paying interest on the national debt is staggering, and being in danger of missing payments could be very problematic.

“Interest costs on the national debt are already exceeding $220 billion,” McClintock said. “Within eight years, they will exceed our defense spending, so any spike in interest rates caused by any question that we’ll make our payments on time and in full could be catastrophic.”

Listen to the WND/Radio America interview with Rep. Tom McClintock, R-Calif.:

Wednesday’s vote took place a day after the White House announced President Obama would veto the legislation if it reaches his desk.

Default by any other name is default” is a common refrain from Democrats, ranging from White House Press Secretary Josh Earnest to Rep. Sander Levin, D-Mich., the top Democrat on the House Ways and Means Committee.

McClintock said Democrats are badly mischaracterizing his bill.

“What they’re doing is confusing default on the sovereign debt of the country, which is basically our credit, with postponement of paying other bills,” he explained. “Neither of those is a good thing. If you’re a family that is living off of its credit cards, as we are at the moment, you had darn well better make the minimum payment on the credit card first or you won’t be able to pay the rest of the bills.

“That’s exactly the situation the United States government is in at the moment.”

The congressman’s greatest frustration on the issue is the refusal of Democrats to show any inclination to find ways to tackle the debt, which is now officially north of $18.4 trillion.

“When the family has to increase its credit limit because it’s spending above its means, it had also better have a serious conversation about what’s driving this debt and what to do about it,” he said. ” That’s what the Democrats refuse to engage in.”

McClintock said most members of both parties acknowledge that existing debts need to be paid, but he said only one sees the status quo as a problem.

“When you are increasing the debt limit, you also have a responsibility to address the policies that are driving that debt,” he said. “Republicans acknowledge that responsibility. Democrats don’t, and that’s the crux of the problem.”

Beyond the blinders McClintock says Democrats wear, he said they are guilty of bewildering hypocrisy on the issue.

“They support loan guarantees to foreign corporations,” he said. “They support loan guarantees to domestic special interests and foreign governments. But they’re unwilling to guarantee loans made to our own government. I can’t understand the logic there.”

Given the partisan divide in the House vote, it’s unlikely the Default Protection Act will reach a final vote in the Senate, much less reach Obama’s desk. McClintock admitted that’s the likely outcome, but he said it’s further evidence of a broken U.S. Senate.

“It will take six Democrats to cross party lines and agree to consider this bill in the Senate,” he said. “That’s a pretty tall order considering the partisanship in the Senate. That’s also a good argument for revisiting the question that it takes 60 votes just to take up a bill in the Senate.”

McClintock believes his approach to staving off a credit disaster will ultimately succeed, but not until 2017.

“I’m counting on a very different president taking office in 458 days, not that I’m counting,” McClintock said. “This measure will pave the road for a future measure in the next Congress that will be signed into law.”