During the debt-limit debate of 2013, to avoid a possible default, Treasury officials reportedly were preparing to give priority to debt-service payments and segregate them from other federal payments. The Government Accountability Office opined that the Treasury has this authority. Since the debt limit ultimately was raised, the Treasury wasn’t called on to attempt the prioritization, but the incident remains noteworthy in assessing the chance of a default.
Members of Congress who believe the debt limit creates an unacceptable risk of default—notwithstanding more than 100 years of history to the contrary—should support legislation exempting sovereign debt from the debt limit or at least explicitly giving priority to principal and interest payments of debt. These would be better outcomes than functionally ignoring the debt limit.
An even better outcome would be to tie any increase in the debt limit to spending reforms again. A modest effort today might include the bipartisan Trust Act, which would fast-track reforms to fiscally challenged programs like Social Security and Medicare, as well as the bipartisan Prevent Government Shutdowns Act, which would reduce brinkmanship without increasing spending.
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