[House Report 113-48]
[From the U.S. Government Publishing Office]
113th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 113-48
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FULL FAITH AND CREDIT ACT
_______
April 30, 2013.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Camp, from the Committee on Ways and Means, submitted the following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 807]
[Including cost estimate of the Congressional Budget Office]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 807) to require that the Government prioritize all
obligations on the debt held by the public in the event that
the debt limit is reached, having considered the same, report
favorably thereon with an amendment and recommend that the bill
as amended do pass.
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Full Faith and Credit Act''.
SEC. 2. PAYMENT OF PRINCIPAL AND INTEREST ON PUBLIC DEBT AND SOCIAL
SECURITY TRUST FUNDS.
(a) In General.--In the event that the debt of the United States
Government, as defined in section 3101 of title 31, United States Code,
reaches the statutory limit, the Secretary of the Treasury shall, in
addition to any other authority provided by law, issue obligations
under chapter 31 of title 31, United States Code, to pay with legal
tender, and solely for the purpose of paying, the principal and
interest on obligations of the United States described in subsection
(b) after the date of the enactment of this Act.
(b) Obligations Described.--For purposes of this subsection,
obligations described in this subsection are obligations which are--
(1) held by the public, or
(2) held by the Old-Age and Survivors Insurance Trust Fund
and Disability Insurance Trust Fund.
(c) Obligations Exempt From Public Debt Limit.--Obligations issued
under subsection (a) shall not be taken into account in applying the
limitation in section 3101(b) of title 31, United States Code, to the
extent that such obligation would otherwise cause the limitation in
section 3101(b) of title 31, United States Code, to be exceeded.
(d) Report on Certain Actions.--
(1) In general.--If, after the date of the enactment of this
Act, the Secretary of the Treasury exercises his authority
under subsection (a), the Secretary shall thereafter submit a
report each week providing an accounting relating to--
(A) the principal on mature obligations and interest
that is due or accrued of the United States, and
(B) any obligations issued pursuant to subsection
(a).
(2) Submission.--The report required by paragraph (1) shall
be submitted to the Committee on Ways and Means of the House of
Representatives and the Committee on Finance of the Senate.
(3) Termination.--The report requirement under paragraph (1)
shall cease to apply after the date of the enactment of the
first increase in the limitation in section 3101(b), United
States Code, after the date of the enactment of this Act.
I. SUMMARY AND BACKGROUND
A. Purpose and Summary
The bill, H.R. 807, as ordered reported by the Committee on
Ways and Means on April 24, 2013, requires the Secretary of the
Department of the Treasury (Treasury) to issue new debt when
the statutory debt is reached to pay principal and interest on
debt held by the public and provide Treasury access to Social
Security Trust Funds notwithstanding the debt limit. In
addition, the legislation requires the Secretary to submit to
Congress a weekly accounting of the principal on mature
obligations and interest that is due or accrued and any
obligations issued pursuant to the new authority.
B. Background and the Need for Legislation
The consequences of the U.S. Government failing to make
timely and complete payment on Treasury debt, that is, a
default, could be severe. A default could push the country back
into recession, which would worsen our debt problem, hinder an
already stagnant economic recovery and threaten our ability to
make any of the payments we owe. The legislation removes the
risk of default by providing a mechanism to ensure that
principal and interest on debt obligations are paid.
Furthermore, it defines interest so Treasury can and must make
the interest payments necessary to ensure that Social Security
benefits can be paid in full.
C. Legislative History
Background
H.R. 807 was introduced on February 25, 2013, and was
referred to the Committee on Ways and Means.
Committee Action
The Committee on Ways and Means marked up the bill on April
24, 2013, and ordered the bill, as amended, favorably reported.
Committee Hearings
The debt limit has been discussed at several Committee
hearings during the 113th Congress. The Committee held a
January 22, 2013 ``Hearing on the Debt Limit,'' which examined
the Congress's borrowing power and operation of the debt limit.
Additionally, the Oversight Subcommittee held an April 10, 2013
hearing, ``Examining the Government's Ability to Continue
Operations When at the Statutory Debt Limit,'' which reviewed
the government's ability to prioritize its obligations and
continue operations should the U.S. Treasury reach its
statutory debt limit and exhaust extraordinary measures.
II. EXPLANATION OF THE BILL
Present Law
The Constitution grants Congress sole authority over the
fiscal powers to tax, spend and borrow:
The Congress shall have Power to lay and collect Taxes,
Duties, Imposts, and Excises, to pay the Debts and provide for
the common Defense and general Welfare of the United States . .
. To borrow Money on the credit of the United States.\1\
---------------------------------------------------------------------------
\1\U.S. Const., art. 1, Sec. 8, cl. 1-2, 5.
Congress exercises its borrowing authority by placing
restrictions on public debt. Until World War I, Congress
typically authorized limited amounts of debt, with defined
maturity and redemption terms, for specific projects. Upon
America's entry into World War I, Congress passed the Second
Liberty Bond Act of 1917 to ensure liquidity necessary to meet
obligations as presented. The Act delegated control over day-
to-day borrowing activity, subject to various limitations to
the Executive branch. In 1939, Congress enacted legislation
creating the first aggregate debt limit, then $45 billion.
It is important to note that because the power to borrow
resides in Congress, the debt limit is not actually a
limitation on the executive's power to borrow. Instead, the
statute containing the debt ceiling is a grant of authority to
the President that he would not otherwise have. When that
authority runs out, it is the Constitution that prevents the
President from attempting to borrow on the credit of the United
States.
The current debt limit is $16.4 trillion. This consists of
both debt held by the public and debt held by the government,
both carrying the full faith and credit guarantee. Debt held by
the public consists of securities the Treasury Department has
issued to investors, and currently amounts to $11.5 billion.
The balance is debt held by the government in the form of non-
marketable Treasury securities, the majority of which, $2.7
trillion, is held by the Social Security Trust Funds.
According to the Treasury Department, the U.S. Government
reached the current debt limit of $16.4 trillion on December
31, 2012. Since that time, Treasury has employed
``extraordinary measures'' to avoid exceeding the debt limit.
These measures temporarily forestall the need to exceed the
ceiling by shuffling funds among accounts, as well as
suspending certain payments and programs. On January 23, 2013,
the U.S. House of Representatives passed, and on February 4
President Obama signed into law, a temporary debt limit
suspension to ensure the complete and timely payment of U.S.
obligations through May 18, 2013. After this date, the
aggregate debt limit will be amended to reflect the total
amount borrowed, which may lead the Department of Treasury to
again utilize extraordinary measures.
Reasons for Change
To permanently end the risk of the United States
experiencing a sovereign default and ensure that the Social
Security Trust Funds can be accessed to pay full benefits while
the debt limit is reached, it is necessary to require the
Treasury Secretary to roll over existing debt and honor
principal and interest commitments by issuing debt outside of
the limit solely for these purposes.
Explanation of Provision
The provision provides that in the event the debt of the
United States Government reaches the statutory limit, the
Treasury Secretary shall issue debt to the extent necessary to
pay principal and interest on certain obligations as defined.
Obligations for which debt shall be issued are limited to those
obligations held by the public or the Social Security Trust
Funds. Obligations issued pursuant to this authority are exempt
from the statutory debt limit. Section 2 also requires a weekly
report from the Treasury Secretary if authority under
subsection 2(a) is exercised that accounts for obligations due
and amounts issued.
Effective Date
The provision becomes effective upon enactment.
III. VOTES OF THE COMMITTEE
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the following statements are made
concerning the votes of the Committee on Ways and Means in its
consideration of the bill, H.R. 807.
The bill, ``H.R. 807, the Full Faith and Credit Act,'' was
ordered favorably reported as amended to the House of
Representatives by a roll call vote of 22 yeas to 14 nays (with
a quorum being present). The vote was as follows:
Votes of the Committee
In compliance with the Rules of the House of
Representatives, the following statement is made concerning the
vote of the Committee on Ways and Means during the markup
consideration of H.R. 807 ``Full and Faith and Credit Act.''
The bill, H.R. 807, was ordered favorably reported, as
amended, to the House of Representatives by a roll call vote of
22 yeas to 14 nays (with a quorum being present). The vote was
as follows:
----------------------------------------------------------------------------------------------------------------
Representative Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Camp....................... X ........ ......... Mr. Levin....... ........ X .........
Mr. Johnson.................... X ........ ......... Mr. Rangel...... ........ X .........
Mr. Brady...................... X ........ ......... Mr. McDermott... ........ X .........
Mr. Ryan....................... X ........ ......... Mr. Lewis....... ........ X .........
Mr. Nunes...................... X ........ ......... Mr. Neal........ ........ ........ .........
Mr. Tiberi..................... X ........ ......... Mr. Becerra..... ........ X .........
Mr. Reichert................... X ........ ......... Mr. Doggett..... ........ X .........
Mr. Boustany................... X ........ ......... Mr. Thompson.... ........ X .........
Mr. Roskam..................... X ........ ......... Mr. Larson...... ........ X .........
Mr. Gerlach.................... X ........ ......... Mr. Blumenauer.. ........ ........ .........
Mr. Price...................... X ........ ......... Mr. Kind........ ........ X .........
Mr. Buchanan................... X ........ ......... Mr. Pascrell.... ........ X .........
Mr. Smith...................... ........ ........ ......... Mr. Crowley..... ........ X .........
Mr. Schock..................... X ........ ......... Ms. Schwartz.... ........ X .........
Ms. Jenkins.................... X ........ ......... Mr. Davis....... ........ X .........
Mr. Paulsen.................... X ........ ......... Ms. Sanchez..... ........ X .........
Mr. Marchant................... X ........ .........
Ms. Black...................... X ........ .........
Mr. Reed....................... X ........ .........
Mr. Young...................... X ........ .........
Mr. Kelly...................... X ........ .........
Mr. Griffin.................... X ........ .........
Mr. Renacci.................... X ........ .........
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Votes on Amendments
The vote on the amendment by Mr. Ryan to the amendment in
the nature of a substitute, which clarifies the exemption of
new obligations applies solely to any incremental debt issued
that is in excess of debt subject to the limit, preventing
Treasury from using the new authority to borrow money for new
spending, was agreed to by a voice vote.
IV. BUDGET EFFECTS OF THE BILL
A. Committee Estimate of Budgetary Effects
In compliance with clause 3(d) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the effects on the budget of the revenue provisions
of the bill, H.R. 807 as reported: The Committee agrees with
the estimates prepared by the Congressional Budget Office
(CBO), which are included below.
B. Statement Regarding New Budget Authority and Tax Expenditures Budget
Authority
The bill as reported is in compliance with clause 3(c)(2)
of rule XIII of the Rules of the House of Representatives.
Further, the bill involves no new or increased tax
expenditures.
C. Cost Estimate Prepared by the Congressional Budget Office
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, requiring a cost estimate
prepared by the CBO, the following statement by CBO is
provided.
CBO estimates that enacting H.R. 807, by itself, would
result in no costs or savings to the federal government because
it would not change any of the government's tax or spending
policies. Therefore, pay-as-you-go procedures do not apply. In
addition, CBO estimates that the bill would not significantly
add to the Treasury's administrative costs.
U.S. Congress,
Congressional Budget Office,
Washington, DC, April 26, 2013.
Hon. Dave Camp,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 807, the Full
Faith and Credit Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Jared
Brewster.
Sincerely,
Robert A. Sunshine
(For Douglas W. Elmendorf, Director).
Enclosure.
H.R. 807--Full Faith and Credit Act
H.R. 807 would allow the Department of the Treasury to
issue debt to pay principal and interest on debt held by the
public and debt held by the Old-Age and Survivors Insurance
Trust Fund and Disability Insurance Trust Fund, if the
statutory limit on debt is reached. The bill would require the
Treasury to provide a weekly report to the House Committee on
Ways and Means and Senate Committee on Finance outlining the
exempted transactions until a new debt limit is enacted.
CBO estimates that enacting H.R. 807, by itself, would
result in no costs or savings to the federal government because
it would not change any of the government's tax or spending
policies. Therefore, pay-as-you-go procedures do not apply. In
addition, CBO estimates that the bill would not significantly
add to the Treasury's administrative costs.
H.R. 807 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act.
The CBO staff contact for this estimate is Jared Brewster.
This estimate was approved by Peter H. Fontaine, Assistant
Director for Budget Analysis.
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE OF
REPRESENTATIVES
A. Committee Oversight Findings and Recommendations
With respect to clause 3(c)(1) of rule XIII of the Rules of
the House of Representatives (relating to oversight findings),
the Committee concluded that it was appropriate and timely to
enact the sections included in the bill, as reported. Under the
No Budget No Pay Act, the debt limit will reset on May 19,
after which Treasury is likely to again use extraordinary
measures and new borrowing will be prohibited. Without the new
authority, the U.S. could risk defaulting on its debt and the
consequences of a U.S. default on a debt payment could be very
serious. At the very least it would hinder an already stagnant
economic recovery, and, in a worst-case scenario, lead the
country back into a recession. Failure to make a debt payment
will increase our borrowing costs and threaten our ability to
make any of the other payments we owe. If signed into law, this
legislation would prevent such an unacceptable situation. The
legislation removes the risk of default and provides
transparency to ensure the Congress can hold the Executive
Branch accountable when using the new authority.
B. Statement of General Performance Goals and Objectives
With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
bill contains no measure that authorizes new or additional
funding compared with the current law baseline, so no statement
of general performance goals and objectives for which any
measure authorizes funding is required.
C. Duplication of Federal Programs
No provision of H.R. 807, the ``Full Faith and Credit
Act,'' establishes or reauthorizes a program of the Federal
Government known to be duplicative of another Federal program,
a program that was included in any report from the Government
Accountability Office to Congress pursuant to section 21 of
Public Law 111-139, or a program related to a program
identified in the most recent Catalog of Federal Domestic
Assistance.
D. Disclosure of Directed Rule Makings
The Committee estimates that H.R. 807 specifically directs
no specific rule makings within the meaning of 5 U.S.C. 551 to
be completed.
E. Information Relating to Unfunded Mandates
This information is provided in accordance with section 423
of the Unfunded Mandates Act of 1995 (Pub. L. No. 104-4).
The bill does not impose a Federal mandate on the private
sector. The bill does not impose a Federal intergovernmental
mandate on State, local, or tribal governments.
F. Applicability of House Rule XXI 5(b)
Clause 5(b) of rule XXI of the Rules of the House of
Representatives provides, in part, that ``A bill or joint
resolution, amendment, or conference report carrying a Federal
income tax rate increase may not be considered as passed or
agreed to unless so determined by a vote of not less than
three-fifths of the Members voting, a quorum being present.''
The Committee has carefully reviewed the sections of the bill,
and states that the bill does not involve any Federal income
tax rate increases within the meaning of the rule.
G. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff
Benefits
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill, and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
H.R. 807 makes no changes to current law.
VII. DISSENTING VIEWS
The Democratic Members of the Committee strongly oppose
this legislation, which is simply a plan to default on the full
faith and credit of the United States. We are further concerned
that just by entertaining the idea that the United States will
no longer pay all of its bills on time and in full, the
Majority is damaging our reputation and our economic recovery.
Rather than continuing to play with fire on the economy, we
urge the Majority to stop blocking a conference on the budget
so that the House and Senate can sit down on a bipartisan basis
and work to get our fiscal house in order.
This legislation would require the Department of the
Treasury to pay Chinese and other foreign bondholders first,
before our troops in harm's way if they are paid at all, before
the doctors and hospitals that care for our seniors on Medicare
if they are paid at all, before our veterans if they are paid,
and before our American small businesses if they are paid. Let
us be clear--under this legislation, the United States would no
longer pay all of its bills on time and in full, and American
families would pay the price.
That is reckless and indefensible. The Department of the
Treasury and other experts have also said it is impossible.
Treasury pays 80 to 100 million bills a month and its computer
system is designed to pay the bills in the order they come in.
It has no way to ``prioritize'' some legal obligations of the
United States over others.
Economists across the political spectrum have warned that
to default would do catastrophic damage to our economy. To put
it in context, the short-term reduction in federal spending and
the resulting fiscal shock from a default would be about 2\1/2\
times as large as the contraction that would have been caused
by the recent ``fiscal cliff.'' At our Ways and Means hearings
on this topic, MIT Economist Simon Johnson warned that a
default could reduce GDP by 20 to 30 percent and double the
unemployment rate.
Apparently proponents of this legislation have forgotten
that the last time Republicans turned our nation toward
default, in the summer of 2011, the damage was serious and
lasting.
Aug. 2011 was the single worst month for job
creation in the last three years.
The Dow Jones Industrial Average plunged 2,000
points in July and August of 2011.
The Treasury was forced to spend $1.3 billion more
in interest payments, according to a Government Accountability
Office estimate. The Bipartisan Policy Center estimates the
higher costs will be almost $19 billion over the next decade.
And of course, who could forget that the U.S.
credit rating was downgraded for the first time in our history.
We want to be clear: prioritization by any name is default.
We oppose this legislation and urge our Republican colleagues
to avoid repeating their mistakes.
Sander Levin.