Ahead of an expected late summer showdown on the debt ceiling, on Wednesday the U.S. House Ways and Means Committee will consider legislation to direct the U.S. Treasury to make all federal debt payments and interest, including guaranteeing that Social Security benefits are paid in full, if the debt ceiling is not raised in August. The Full Faith and Credit Act is introduced by Republican Congressman Tom McClintock of California.
"This assures investors that America will make good on its debt while focusing Washington on the true problem -- the real risk of another downgrade of America's credit rating if the President and Congress don't take sensible, credible steps to save Social Security and Medicare for the long term," says U.S. Congressman Kevin Brady of Texas, a senior member of the committee, who supports the bill.
The federal government is generating more taxes and revenue than at any time since 2007, notes Brady, "so there is plenty of money to pay the debt if the ceiling is not raised on time. A default would raise interest rates and likely push America back into a double-dip recession."
Brady says he is most concerned about avoiding a second downgrade of America's credit rating.
"Let's take default off the table so the President and Congress can't hide any longer from the serious financial problems facing Medicare and Social Security," concluded Brady. "We've got to act now, together, to preserve these important programs for the long haul or risk a second downgrade of America's credit -- which will increase the nation's deficits and make credit more expensive for families, small businesses and local governments."