Paul Ryan: Government Can Avoid Default, Prioritize Spending if We Hit the Debt Limit

WILLIAMSBURG, Va. – Rep. Paul Ryan took a quick break from the House GOP’s retreat to discuss the sequence of spending fights to come. There was one small wobble on the debt limit, when Ryan suggested that members were “looking at” – not decided upon, but considering – a short-term debt limit increase. But when asked whether the sequester, a shutdown, or default was “worst” for the economy, Ryan suggested that the worst of all possible worlds would be a failure to deal with spending. If the debt limit was reached, then Ryan still believed in a Republican idea from 2011: Letting the federal government prioritize spending, so that interest payments were mae first.

“We believe they have the ability to prioritize,” he said. “I’m speaking for myself – I believe Pat Toomey would say the same thing. There’s disagreement about whether that’s true or not.” Toomey, a supporter of the 2011 prioritization concept, has suggested new legislation that would tell the government to pay interest and veterans’ benefits first, if cash ran low. Ryan seemed to endorse that. “We obviously believe that the administration should prioritize such things. And people like me are fine with giving the administration crystal-clear authority on how to prioritize such things. Plenty of members have talked about that.”

One reporter pointed out to Ryan that Fitch, one of the ratings agencies, had warned that prioritization would spook them into a downgrade of America’s credit rating.

“Prioritization in and of itself, meaning only prioritization, is I think what Fitch said,” said Ryan. “What Fitch also said is that if no agreement that comes out of this that gets spending under control, then we’ll also have a downgrade. So what Fitch said is basically what we see: Out of these discussions must progress on the deficit issue, on the debt issue, on spending. Otherwise we’ll have a downgrade.”