Debt Limit Bill Passes House, Ordering Obama To Pay Only Some U.S. Creditors On Time

Posted: 05/09/2013 11:42 am EDT;Updated: 05/10/2013 12:44 am EDT

WASHINGTON -- The House passed a measure Thursday that would amount to the rough equivalent of declaring bankruptcy for the United States, directing the government to meet only certain obligations if Congress failed to raise the country's borrowing limit.

Republicans characterized the measure as a responsible step to mitigate the fallout from such a failure, but Democrats slammed it as the "Pay China First Act."

The legislation, which is actually called the Full Faith and Credit Act, lacks support in the Democratic-controlled Senate, and President Barack Obama has threatened to veto it. But it passed the House 221 to 207.

If Congress does not raise the debt limit, the Full Faith and Credit Act would direct the White House to pay U.S. debts in a certain order -- to first pay people on Social Security and holders of U.S. bonds, which include many major U.S. pension funds and foreign governments, with China being the largest among them.

Other obligations, from Medicare to military benefits, would go on the backburner.