Paying China First

In a nutshell, that seems to be forming up as the GOP plan to avoid defaulting on the US debt if there is no agreement on the debt ceiling. From TPM:

“I intend to introduce legislation that would require the Treasury to make interest payments on our debt its first priority in the event that the debt ceiling is not raised,” Sen. Pat Toomey (R-PA) wrote in a Friday Wall Street Journal op-ed.

If passed, Toomey’s plan would require the government to cut large checks to foreign countries, and major financial institutions, before paying off its obligations to Social Security beneficiaries and other citizens owed money by the Treasury — that is, if the U.S. hits its debt ceiling.

Toomey’s legislation is SB 163.

It boggles the mind, doesn’t it? On all kinds of levels — because not only does the so-called Party of Business not quite get the full range of US obligations, but they are perfectly willing to prioritize protecting the principal and interest obligations of foreign governments over their obligations to, military payrolls or Social Security recipients. And there is a House version too. And as the Treasury officials point out, not defaulting on the Chinese doesn’t mean you haven’t defaulted:

“[T]his idea is unworkable,” said Deputy Treasury Secretary Neal Wolin in a statement. “It would not actually prevent default, since it would seek to protect only principal and interest payments, and not other legal obligations of the U.S., from non-payment. Adopting a policy that payments to investors should take precedence over other U.S. legal obligations would merely be default by another name, since the world would recognize it as a failure by the U.S. to stand behind its commitments.”

But what a ham-fisted way to try to send a signal to investors that *they’ll* be fine — it is only (as usual) the American people (and American contractors) who they plan to screw over by not addressing the debt limit.

Welcome to the era of Keystone Cops government, folks.

ps. — I read about this on a number of blogs today, even though these bills were filed last week. Interesting that this hasn’t hit the traditional media yet — this is a Really Big Deal (which makes the GOP look really stupid), so am interested to watch how long it takes for the media to catch this bit of foolishness.