The Default Prevention Act would set up a prioritized, tiered approach for paying the U.S. government’s obligations if the debt subject to the statutory limit is reached. When the debt limit is binding, the Secretary of the Treasury would first focus on paying Tier I obligations (the most essential debt and certain program payments), then issue new Treasury securities to fund those payments or hold funds in a trust, and only then pay lower-priority tiers (Tier II through Tier V) to the extent funds remain available. The bill also requires weekly reports to Congress detailing payments and unpaid obligations by tier. It also specifies that, while these provisions are in effect, other authorities to prioritize payments are not restricted, and it creates a mechanism that would not count certain new obligations against the debt limit (at least until any modification to the limit takes effect). In short, the bill is designed to prevent a default by explicitly guaranteeing a payment order and financing method for the most critical government obligations, while creating ongoing reporting and a defined hierarchy that could steer how money is allocated during debt-limit impasses.
Key Points
- 1Tiered payment priority when the debt limit is reached:
- 2- Tier I obligations are paid first (including debt held by the public, certain trust fund obligations, and Medicare program payments).
- 3- Tier II obligations (e.g., certain Department of Defense obligations and VA benefits) are paid only after Tier I can be fully funded.
- 4- Tier III, IV, and V are paid only to the extent that higher tiers can be funded (with Tier V covering Congressional compensation).
- 5New Treasury securities issuance to fund Tier I:
- 6- To meet Tier I payments, the Treasury would issue new securities (subsection a(2)) and/or use funds held in a trust fund, as appropriate.
- 7- These newly issued obligations under this authority would not count against the public debt limit (31 U.S.C. 3101(b)) until the first date any modification or suspension of the limit takes effect.
- 8Tier definitions and examples:
- 9- Tier I: principal and interest on debt held by the public and various trust funds, plus Medicare Part A payments.
- 10- Tier II: DoD obligations and VA benefits.
- 11- Tier III: any other U.S. obligation not in Tiers I, II, IV, or V.
- 12- Tier IV: certain federal employee compensation, travel and other executive-branch payments, generally excluding Tier I/II obligations.
- 13- Tier V: compensation of Members of Congress.
- 14Weekly congressional reporting:
- 15- The Treasury would provide a weekly written report detailing amounts paid (by tier), new obligations issued, and amounts due but unpaid by each tier.
- 16Relationship to existing debt management authorities:
- 17- The act expressly states that nothing in this section should be read to restrict the Treasury’s existing authority to prioritize payments when this section does not apply, preserving current discretion outside the triggering conditions.