Here’s a plan for paying Social Security, Medicare and military if debt ceiling is reached

Many congressional Republicans support what they see as a logical way to keep key parts of the federal government running if it hits the current debt limit before there is an agreement to raise it: fund Social Security, Medicare and the military first.

Everything else? It would be paid for in what they view as descending priority — if funding is available.

“No president can threaten to hold seniors or service members or veterans hostage as well,” said Rep. Tom McClintock, R-Elk Grove. He’s the chief sponsor of the Default Prevention Act, which has been approved by the Republican-led House Ways & Means Committee and is headed for a full House vote.

Republicans and Democrats are far apart over how to increase the debt ceiling. The $31.4 trillion limit was reached in January and Treasury has since been taking what it calls extraordinary steps to continue to paying the nation’s bills.

Treasury Secretary Janet Yellen warned last week that the government could run out of money to meet its obligations as soon as June 1. The House approved a detailed plan to cut spending while increasing the limit. Democrats, who say that plan would be devastating to social programs and other measures, are seeking a “clean” increase without strings attached.

President Joe Biden, House Speaker Kevin McCarthy, R-Bakersfield, and other congressional leaders are scheduled to meet Tuesday for talks. If the government defaults, for the first time ever, it’s uncertain what would happen.

Yellen has argued against the McClintock-inspired plan, calling it “an exceptionally risky, untested and radical departure from normal payment practices of agencies across the federal government.”

Top congressional Democrats also are critical. “We need to pay all our bills,” said Senate Finance Committee Chairman Ron Wyden, D-Oergon, whose committee would have to approve such legislation.

Even if the GOP plan were in effect, Wyden asked, “Does the federal government have the technical capacity to prioritize some payments ahead of others?” Government experts are doubtful.

The Republican plan

The Ways & Means-approved measure says the debt of the United States will be paid in full and on time in the event of a fiscal impasse over the debt limit.

Until there was a resolution, Treasury would pay based on a tiered structure.

First priority would be principal and interest on the public debt, as well as Social Security and Medicare benefits. Next in line would be bills incurred by the Pentagon and the Department of Veterans Affairs.

After that would come payments for any program not in a designated tier, such as other Cabinet agencies.

Finally, if funding was available, there would also be funding for other items, such as executive branch travel, and compensation of the President, Vice President and some political appointees.” The last priority would be compensation for members of Congress.

“Just like regular Americans, the President and Congress shouldn’t get paid until the job is done,” explained House Ways and Means Committee Chairman Jason Smith, R-Mo. The committee sent the bill to the House floor on a party line 21 to 17 vote.

The nonpartisan Congressional Budget Office estimated that the cost of implementing this system would “significantly exceed” $500,000. But there’s a much bigger technical hurdle, according to CBO: the Treasury’s payment systems are not set up to handle different priorities.

Problems with the plan

Yellen explained at a Senate Finance Committee hearing.

“The government on average makes millions of payments each day and our systems are built to pay all of our bills on time and not to pick and choose which bills to pay,” she said.

Yellen said the GOP proposal is an “incredibly risky and dangerous idea and it has never been tried before. I cannot give any assurances about the technical feasibility of such a plan.”

Critics also point out that by prioritizing public debt, the government would be placing the interests of investors, particularly foreign investors, ahead of the needs of constituents.

McClintock counters that most U.S. government debt is held by Americans, in the form of government and private retirement funds, and not foreign investors. With his plan, these investors are important because they would help keep Social Security, Medicare and military payments going.

His chief argument for the plan is that the Treasury was given the authority to implement such a system when Congress established the department in 1789.

“It shall be the duty of the Secretary of the Treasury to digest and prepare plans for the improvement and management of the revenue, and for the support of public credit,” it says.

The 14th Amendment to the Constitution goes somewhat further, saying “validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”

Yellen is unenthusiastic about using the amendment as a basis for paying off debt.

“We shouldn’t be in a position where we need to consider whether or not the 14th Amendment applies,” she told ABC’s “This Week” in 2021.