Larsen: Republican Bill Sends Message that United States is Getting Ready to Default on its Debts

May 9, 2013 Issues: Budget

WASHINGTON—Rep. Rick Larsen, WA-02, today voted against a Republican bill that would require the United States to put foreign bondholders ahead of payments to Americans in the event that Congress fails to raise the debt ceiling and forces default.

“This bill sends a dangerous message around the world and to our own citizens: that the United States is getting ready to default on our debts,” Larsen said. “Under this bill, the United States would be required to pay foreign creditors before meeting its obligations to our troops, veterans, small businesses and doctors who care for our seniors.

“The United States already lost its sterling credit rating thanks to Republican posturing on paying the debts we owe. This bill could have much worse consequences.

“I remain committed to tackling our budget deficit and bringing our debt to sustainable levels under a balanced approach. The United States must pay the debts it already owes, and Congress must stop its reckless gamesmanship over the debt ceiling.”

More information on the bill is available here.

What credit rating agencies and other experts have said about debt prioritization:

  • Standard & Poor's global head of sovereign ratings David Beers:  “[prioritizing debt payments] would mean a very sudden fiscal shock that the longer it lasted would filter powerfully through the system. Potentially that would be deeply disruptive to the economy."  [Reuters, 7/26/2011]
  • Mark Hopkins, senior economist with Moody’s Analytics:  “That’s [debt prioritization] like rearranging the deck chairs on the Titanic.” [Politico Pro, 1/15/13]
  • The Economist:  “… Not only would that threaten to send the economy back into recession. It would also deprive doctors, pensioners, contractors and millions of others of money needed to meet their own obligations, setting off a chain reaction of defaults.” [1/12/13]