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[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   ........  .........
----------------------------------------------------------------------------------------------------------------

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.

                                  
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