Pat Toomey’s ‘Pay China First’ plan

PAT TOOMEY’S ‘PAY CHINA FIRST’ PLAN…. In Pennsylvania’s U.S. Senate race last year, former congressman and Wall Street veteran Pat Toomey (R) was accused of focusing a little too much on China’s financial interests. Democrats hammered the GOP nominee, for example, for supporting trade deals with China that would likely hurt Pennsylvania.

Toomey brushed off the criticism and narrowly won in November. This week, he’s apparently eager to prove his critics right.

New Republican legislation in the House and Senate would force the U.S. government to reroute huge amounts of money to China and other creditors in the event that Congress fails to raise its debt ceiling.

“I intend to introduce legislation that would require the Treasury to make interest payments on our debt its first priority in the event that the debt ceiling is not raised,” Sen. Pat Toomey (R-PA) wrote in a Friday Wall Street Journal op-ed.

If passed, Toomey’s plan would require the government to cut large checks to foreign countries, and major financial institutions, before paying off its obligations to Social Security beneficiaries and other citizens owed money by the Treasury — that is, if the U.S. hits its debt ceiling.

Here’s the deal: if right-wing lawmakers block an extension of the debt level, the Treasury would be forced to start moving money around to try to figure out how pay the government’s obligations. Toomey’s proposal intends to set priorities for the Treasury — before the government pays anyone anything, it would have pay foreign creditors, most notably, China.

This wouldn’t avert a potential global economic catastrophe, but it would make sure the United States wrote checks to foreign governments before anyone else. It’s been dubbed the “Pay China First” plan — and it’s what happens when Republicans have a good election cycle.

“[T]his idea is unworkable,” Deputy Treasury Secretary Neal Wolin said in a statement. “It would not actually prevent default, since it would seek to protect only principal and interest payments, and not other legal obligations of the U.S., from non-payment. Adopting a policy that payments to investors should take precedence over other U.S. legal obligations would merely be default by another name, since the world would recognize it as a failure by the U.S. to stand behind its commitments.”

There’s a companion version in the House championed by Rep. Tom McClintock (R-Calif.), which has 15 co-sponsors (all Republican).

The Toomey measure is expected to be voted on in the Senate today. It’s also expected to lose, but the fact that it was proposed in the first place, and will likely receive some GOP support, speaks volumes.