By Congressman J. Randy Forbes (R-VA04)
In the weeks since Treasury Secretary Timothy Geithner’s warning that the U.S. would hit its debt limit of $14.3 trillion by May 16, debate about whether to increase the debt ceiling has exploded.
The most inflammatory rhetoric we’re hearing is the threat that failure to raise the debt limit would automatically cause the U.S. to default on our national debt. This claim, thankfully, is baseless.
Whether or not the debt ceiling is raised, the federal government collects significantly more revenue than it needs to fulfill U.S. debt obligations. According to projections for next year, interest payments on our national debt will represent 6.5% of total federal government expenditures, and tax revenue will cover about 67% of all government spending. Thus, if the debt ceiling is reached, the government will still have ten times as much revenue as it needs to make debt payments. The only way the U.S. will immediately default upon reaching the debt ceiling is if the government actively chooses to do so by not making debt payments.
We can—and must—make paying the national debt our top priority. The Full Faith and Credit Act, which I have cosponsored, offers a simple safeguard to prevent default. This bill would ensure that the U.S. government does not default on its debt by requiring the Treasury to prioritize payments on the public debt over any other payments in the event the debt ceiling is not raised.
Allowing the U.S. to default on its debts would jeopardize the full faith and credit of the U.S. government and pose unthinkable risks to our economic prosperity and national security. Defaulting would result in the U.S. being stripped of its AAA credit rating and could cause the dollar to lose its status as the world’s reserve currency. In turn, we would soon see sky-high interest rates, rapid inflation, and a deteriorating standard of living for the American taxpayers.
The recent explosion in government spending has caused our debt to skyrocket, and it has become clear that the U.S. is on an unsustainable fiscal path. The Full Faith and Credit Act would reassure our creditors that the U.S. will honor its debts and is serious about making significant spending cuts in order to do so. The passage of this bill would affirmatively tell investors that the U.S. is determined to change its current path of skyrocketing debt and unprecedented expansions in government spending.
By taking the unthinkable option of default off the table, the Full Faith and Credit Act would eliminate the distractions of inflammatory rhetoric and allow Congress to have a productive debate about how to rein in the government’s out-of-control spending and return the United States to a sustainable fiscal path.
Countless American families have faced comparable situations, where they realize that their income will be inadequate to meet their current spending levels. Most react to this situation by reassessing their finances and determining where they can cut back on future spending.
There’s no reason Congress can’t do the same.
