SHAHEEN: FAILURE TO PAY OUR BILLS COULD CAUSE ECONOMIC CATASTROPHE
The Senator delivered the following remarks today on the Senate floor.July 14, 2011
As prepared for delivery:
The media has been focused on our differences. But I think there is one thing that every single member of this body agrees on -- we have to address the long-term debt and deficits.
Like many members of this Chamber, I have repeatedly called for a bipartisan package that includes reforms to everything deficit related. That means CUTS to spending – domestic, defense, and mandatory – as well as increased revenues. I have supported attaching deficit reduction measures to the vote on the debt limit. And I believe reducing the deficit is critical to strengthening the long-term health of the economy.
But I also believe that everyone – everyone – has to come to the table to find a compromise solution that will get this done. Democrats know this, and that’s why time and again we have offered compromise plans, including more than a trillion dollars in spending cuts. It’s disappointing that politics are keeping some from negotiating in good faith. That’s a disservice to the American people.
I’ve spoken before about what some people are trying to protect – tax breaks for big oil, for hedge fund operators and for yacht owners. I’d like to speak now about what some are willing to risk to protect those tax giveaways. What happens if we don’t increase the debt limit and meet the United States’ financial obligations.
First of all, raising the debt limit does not mean spending more. Our spending is set by Congress’ annual budget process.
Raising the debt limit means paying our government’s bills. Our government. It’s not the Democrats’ government, it’s not President Obama’s government. It belongs to all of us. We’re talking about servicing savings bonds issued under President Reagan. Supporting an Army first sent to Afghanistan under President Bush. Paying Social Security checks, food inspectors, and air traffic controllers. This is about the full faith and credit of our government.
Failure to raise the debt limit means default. It means the United States would not meet its obligations.
What would happen?
Warren Buffett said it would be Congress’ quote, “most asinine act ever.”
Fed Chairman Ben Bernanke said it would lead to, quote, “a huge financial calamity.”
Economist and former Reagan advisor Larry Kudlow said default would be, quote “catastrophe.”
The biggest concern these experts name is the potential for a global financial crisis. Companies, pension funds, and governments across the world hold U.S. savings bonds. A default could trigger a crisis worse than the one in 2008, which itself triggered the worst recession since the Great Depression.
We are just now climbing out of the hole caused by the last financial crisis. We cannot risk another one.
Let me read from a letter sent to Congress earlier this week by hundreds of America’s top businesses and business organizations, including the Chamber of Commerce, the Financial Services Roundtable, and great New Hampshire companies like Cirtronics and ControlAir.
“We believe it is vitally important for the US government to make good on its financial obligations ….
“It is critical that the US government not default in any way on its fiscal obligations. A great nation - like a great company - has to be relied upon to pay its debts when they become due. This is a Main Street not Wall Street issue. Treasury securities influence the cost of financing not just for companies but more importantly for mortgages, auto loans, credit cards and student debt. A default would risk both disarray in those markets and a host of unintended consequences. The debt ceiling trigger does offer a needed catalyst for serious negotiations on budget discipline but avoiding even a technical default is essential. This is a risk our country must not take.”
Again, this isn’t my opinion. This is the opinion of business leaders. We should listen to them.
In a recent op-ed in USA Today, the Chamber and the Financial Services Forum spelled out why they believe a default would result in, again I quote, “hundreds of thousands of lost jobs every year.”
First, they point out that a default would halt critical government operations, far more abruptly than we’ve seen in past standoffs over the budget. They say, quote:
“The U.S. Treasury is expected to take in about $170 billion in tax revenue in August, but needs to pay $300 billion in expenses. The resulting $130 billion deficit would require the government to pick which programs — Medicare, Medicaid, food stamps, unemployment insurance — to pay for and which not to fund. And there would be little money left to pay our troops or to run the courts, the prison system, the FBI, or other essential operations.”
They go on to note that default would make our government debt and deficit problem worse.
Yesterday, Moody’s, the credit rating agency, put the United States governments’ credit rating under review. If Moody’s were to downgrade our credit rating, investor confidence in U.S. bonds would be shaken, and it would be more expensive for our government to borrow money.
JP Morgan says that increased interest rates could increase our annual deficits by a staggering 75 billion dollars every year. Just from higher interest rates. If we’re serious about reducing the deficit, this is the wrong way to go.
That’s why we need to find a compromise solution. We have in the past. The debt limit has gone up under every President in modern times. President Nixon raised it 9 times. President Clinton raised it 4 times. Since President Kennedy, the most frequent and largest increases came under President Reagan. He raised the debt limit 18 times, by a total of 199 percent. I don’t think anyone here thinks President Reagan was a champion of big government.
I believe that many of my colleagues on both sides of the aisle understand the importance of getting this done. I believe many of them believe in the value of compromise. We all have to be at the table. We all have to be ready to compromise to reach a solution.
I ask my colleagues to do what’s right and put politics aside. For the good of the economy and of the country.
Press Office, (202) 224-5553
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