Default Prevention Act

To provide guidance and priorities for Federal Government obligations in the event that the debt limit is reached and to provide a limited and temporary authority to exceed the debt limit for priority obligations. 1. Short title This Act may be cited as the Default Prevention Act 2. Prioritizing obligations (a) In general In the event that the debt of the Government of the United States reaches the statutory limit under section 3101 of title 31, United States Code, the following expenditures shall be granted priority over all other obligations incurred by the Government of the United States: (1) The authority of the Department of the Treasury provided in section 3123 of title 31, United States Code, to pay with legal tender the principal and interest on debt held by the public. (2) The full payment of compensation, allowances, and benefits for members of the Armed Forces on active duty. (3) The authority of the Commissioner of Social Security to pay monthly old-age survivors’ and disability insurance benefits under title II of the Social Security Act. (4) The authority of the Secretary of Health and Human Services to make payments for items and services furnished to beneficiaries under the Medicare program under title XVIII of the Social Security Act and related provisions. (5) All obligations under any program administered by the Department of Veterans Affairs. (b) Authority To issue additional debt for priority obligations (1) In general The Secretary of the Treasury may issue obligations subject to limit under section 3101 of title 31, United States Code, in an amount in excess of the limit under such section— (A) during the 30-day period beginning on the date on which the United States is unable to use revenues or the extraordinary measures described in paragraph (2) to fully pay obligations of the Government of the United States described in subsection (a) at the time they are due; (B) only to the extent necessary to make timely payment on obligations of the Government of the United States described in subsection (a); and (C) if the Secretary provides to Congress notice of the exercise of the authority under this subsection. (2) Extraordinary measures The extraordinary measures described in this paragraph are the following: (A) The authority under subsections (j), (k), and (l) of section 8348 of title 5, United States Code. (B) The authority under subsections (g) and (h) of section 8438 of title 5, United States Code. (C) The suspension of investing amounts in the stabilization fund under section 5302(a)(1) of title 31, United States Code. (D) The suspension of investing of amounts or the issuance of obligations for any other fund or account for purposes of preventing the amount of obligations subject to limit under section 3101 of title 31, United States Code, from exceeding such limit.

Summary: Default Prevention Act This bill requires the following obligations to be granted priority over all other U.S. obligations if the public debt reaches the statutory limit: principal and interest on debt held by the public; compensation, allowances, and benefits for members of the Armed Forces on active duty; Social Security benefits; Medicare benefits; and obligations under any program administered by the Department of Veterans Affairs. If Congress is notified, the Department of the Treasury may issue additional debt for the priority obligations in excess of the debt limit. Treasury may issue the additional debt during the 30-day period beginning on the date on which the United States is unable to use revenues or extraordinary measures to fully pay the priority obligations at the time they are due. (The term "extraordinary measures" refers to a series of actions that Treasury may implement to allow the United States to borrow additional funds without exceeding the debt limit. The measures generally include suspensions or delays of debt sales and suspensions or redemptions of investments in certain government funds.)