More On Toomey's "Pay China (And The Banks) First" Bill

Remember that bill?

We updated you on it here. Before we go any further, we should reiterate who would get "paid first" with Toomey's bill. In my blog post, I quoted TPM and they wrote:

According to economist Dean Baker, who heads the Center for Economic and Policy Research, the debt is fairly spread out, but a disproportionate chunk is held by large financial institutions -- the same institutions that triggered the financial crisis. That crisis, and the economic downturn it created, cost the Treasury a tremendous amount of revenue, and accelerated the country's march toward its debt limit. Now, many of those same financial institutions want to be at the front of the line if the country nears default.

That's who Toomey wants to pay off first.

The bill's been tabled. For more, here's Dan Malloy of the P-G:

The Toomey bill -- brought to the floor as an amendment to a patent reform bill and co-sponsored by Louisiana Republican David Vitter -- would have required the government to service the debt first if the cap is reached. Toomey argued this would take the threat of a default off the table, thus giving him and his cohorts more room to negotiate budget concessions (probably the real reason the bill went down).

Toomey mixed it up with Treasury Secretary Tim Geithner and Fed Chairman Ben Bernanke about his proposal in hearings, but the Obama administration kept up its line that failing to raise the debt ceiling would bring on the Four Horsemen of the Apocalypse or something like that. Congressional Democrats also had a snappy nickname for the bill: Pay China First (pay no mind to the fact that most of the debt is domestically held).

That last link goes back to the Christian Science Monitor piece mentioned by TPM. But let's put some nuance into Malloy's "most is domestically held." From the CSM:

At the end of 2010, about 53 percent of US debt held by the public was held domestically, according to a recent study from the Congressional Budget Office.

Within this slice, the largest category is individuals – Treasury notes are good solid additions to any portfolio. US individuals hold 12 percent of the country’s debt. Next under the domestic category comes the Federal Reserve, which holds 9 percent of US debt, then pension and retirement funds, mutual funds, and state and local governments.

Foreigners hold about 47 percent of US public debt. And yes, the largest foreign holder here is China – but only by a hair. Chinese investors are owed 9.8 percent of US debt. Next comes Japan, at 9.6 percent, and the United Kingdom, at 5.1 percent.

53-47 ain't that much of a spread. So yes most is domestically held (and of that a large chunk is held by some of the same financial institutions that triggered the downturn in the first place) but almost the same amount isn't. And about 10% of the National Debt is owed to the Chinese.

That's who Toomey wanted to pay off first. Good thing he failed at getting his bill passed. Let's hope he continues to fail similarly.

The message from the GOP is that money protects money and the rest of us will just have to learn to sacrifice.