By Dan Kervick
My fellow NEP blogger Joe Firestone wrote recently about House Resolution 807, the Full Faith and Credit Act, which was passed on May 9th by the US House of Representatives. The supposed purpose of the act is to prevent default on the public debt as a result of the debt ceiling. Many have described the act as a measure that prioritizes the financial obligations of the US government, and authorizes the Secretary of the Treasury to meet only the highest priority obligations when at the debt ceiling. Indeed, that is how the act is described by its own authors, since the head of the resolution contains the description, “A bill to require that the Government prioritize all obligations on the debt held by the public in the event that the debt limit is reached.”
Now that the bill has been passed, the words “a bill” in that description have been replaced by “an act.” The act seems to have been designed to provide the Secretary of the Treasury with an alternative mechanism for paying off public debt and meeting Social Security obligations once the government has reached the statutory debt limit. But the new mechanism cannot be applied directly to other government spending commitments, and so Congress would still apparently have the ability use the debt ceiling as a tool for shutting down other government payments and forcing the executive branch to accept further spending cuts.
Such might have been the authors’ intentions. But if I am not mistaken, this act would provide the Secretary of the Treasury with the power to meet all US spending obligations, and effectively eliminate the debt ceiling as a serious political and operational consideration going forward.