Treasury’s Priorities List Might Cost Votes

Outlining Who Gets Paid First Might Embolden GOP Skeptics

Posted July 28, 2011 at 6:34pm

Republican votes for a debt ceiling deal might be tougher to get after the Treasury Department unveils a priority list that ensures bondholders will be paid in the event that the debt limit is not raised by Aug. 2. Many Republican lawmakers have expressed doubts that Tuesday’s deadline means the U.S. risks default on its debt and welcomed the Treasury’s Thursday announcement.

“I think when people say one thing and do something very different and people discover that, it becomes harder to do business with folks,” Sen. Pat Toomey said after a speech Thursday on the floor about the Treasury’s plan to prioritize debt payments.

The Pennsylvania Republican’s sharp comments were spurred by the administration’s dismissal of legislation that he has introduced to lay out a plan for prioritizing payments to debt obligations and federal agencies in the event that the debt limit is not raised.

“It was described as reckless, irresponsible and unworkable,” he said on the floor. “Now we have … reports … that Treasury is assuring the banks that there will be no default, that they have it covered, that they have taken care of this.”

“I am glad they have finally come to this conclusion … better late than never,” he continued. “Congress ought to have a role in it.”

In a statement Thursday, a Treasury official said, “While only Congress has the ability to ensure the government pays all of its bills, Treasury will provide more information as we get closer to August 2 regarding how the government would operate without new borrowing authority if the debt limit is not increased.”

Toomey introduced a bill in January designed to avoid default by requiring Treasury Secretary Timothy Geithner to pay bondholders first if the debt ceiling is not raised by Aug. 2, when the nation is scheduled to exhaust its borrowing authority.

On Tuesday, he introduced legislation that would require the Treasury to pay bondholders, Social Security recipients and active-duty military members ahead of others.

He wrote to Geithner on Thursday beseeching him to back his latest bill. “I urge you to support this legislation or to work with me and other members of Congress to constructively improve upon it,” Toomey said in the letter. “It is important that we send a united, bipartisan message to the markets that defaulting on our debt is not an option, and I hope you will join me and many of my Senate and House colleagues in doing so.”

Rep. Rich Nugent (R-Fla.), a co-sponsor of the Toomey bill, said the Treasury’s announcement vindicates their effort.

“It is the right thing to do,” said Nugent, a tea-party-backed freshman. He added that Republicans are earnestly looking for a solution to the issue and hoping to ramp down the deficit in the future. Earlier in the day, he said he would vote for Speaker John Boehner’s (R-Ohio) debt limit increase proposal.

Rep. Ann Marie Buerkle (R-N.Y.), another tea party freshman, said she was frustrated with the White House and Senate Democrats.

“There is an awful lot of doublespeak coming out of the White House and the Senate,” Buerkle said. “The White House almost becomes irrelevant in this conversation because when you don’t offer a plan … you become irrelevant.”

Sen. Mike Crapo said he thinks the Treasury is weighing political factors as it decides to release its list.

“I think part of the reason they may be slow in coming out is to let the politics play out,” the Idaho Republican said. “But … once they lay out something … then it creates an entirely new political battle over the priorities they have set.”

Sen. Benjamin Cardin believes “it could cut both ways.”

The Maryland Democrat said identifying “who is not going to get paid will certainly make the phone calls more intense” and could spur a deal.

But “it also does help those who say, ‘Look, there is a way through this without an increase'” in the debt limit, Cardin said.

“I think they don’t want to put this out, so I think they wait until the last possible minute,” Cardin added.

House Budget ranking member Chris Van Hollen (D-Md.) said the Treasury list could help push a compromise.

“People need to understand the consequences of their actions, and to the extent that the Treasury Department can make clear what the consequences are, it should focus the minds of a lot of people up here,” Van Hollen said.