The Senator delivered the following remarks today on the Senate floor.
As prepared for delivery:
The United States government is now less than a week away from defaulting on its obligations for the first time in history. As we’ve heard from economists and business leaders across the country, a default could result in hundreds of thousands of lost jobs and higher interest rates for every American. And yet, we’re still debating whether or not we should avoid default. It’s a very dangerous game. We are risking permanent harm to the American economy.
Let’s examine just one consequence of default for a moment. All three credit ratings agencies – S&P, Moody’s, and Fitch – have said that a default would automatically result in a lower credit rating for the U.S. government.
We all understand the basic principle of a credit rating. It’s like the credit scores on record for most of us. The better we’ve been about paying our debts in the past, the better our credit score. When we go to buy a house or a car, and we ask for a loan, the bank looks at that credit score and decides how much interest to charge us. The worse we’ve been at paying our debts in the past, the lower our score, and the more money we pay in interest.
Well the credit ratings agencies are keeping a credit score on the U.S. government. And so far, it’s been perfect. The U.S. has never failed to pay its debts. That’s why the U.S. has the lowest interest rates in the world and loaning money to the U.S. government is considered the world’s safest investment.
With a default that would all change. And here is the key – it would change in just minutes and the change would last forever.
If we default, the credit ratings agencies will lower our credit rating immediately. I recently spoke with Martin Regalia, the chief economist of the U.S. Chamber of Commerce. He said the market reaction to a default would take, quote, “nanoseconds.”
Once we have defaulted, we can never un-ring the bell. Our special status as the world’s safest investment may never return. We will have increased our interest rates for decades to come, perhaps longer. JP Morgan Chase said this week that a lower credit rating could cost our government $100 billion a year in interest.
This is the worst kind of wasteful spending. That money wouldn’t be going to investments in our economy, or to secure a better future for our children. It would go to nothing. It would do nothing. It would just be money down the drain.
Now – we have a path forward. It’s the plan recently presented by Senator Reid.
There are many things about this plan that I don’t like. I am concerned because it does not take the balanced approach towards deficit reduction that I have long called for. I’m also disappointed that it lacks the $4 trillion in deficit reduction we need. But I am prepared to support it. And because all of the cuts in this bill are cuts that Republicans have already supported, they should be prepared to support this plan too.
The Reid plan would cut $2.2 trillion off our debt while allowing us to avoid default through the end of next year. These two elements are crucial to avoid the lower credit rating I spoke of earlier. We need to provide the markets some long-term certainty that we’ll avoid default, and some proof that we can deal seriously with our long-term deficits and debt.
A short term, six-month increase, as proposed/passed in the House this week, would just kick the can down the road. It won’t prevent a lower credit rating. We need to end this constant threat of default, which is paralyzing our government and our economy.
The Reid plan achieves this reduction through a combination of cuts to our domestic spending, reduced spending on the wars in Afghanistan and Iraq, and through targeted cuts to mandatory spending. It doesn’t raise taxes, and it doesn’t touch Medicare, Medicaid or Social Security.
Again, this is not a perfect plan. I have spoken many times in favor of a balanced package that includes CUTS to spending – domestic, defense, and mandatory – as well as increased revenues. The Reid plan doesn’t achieve those goals, but I have hope that we will get there eventually.
This is not a proposal that I would have written. But I am one of 100 members of this body. One of 535 members of Congress. I don’t get everything I want. That’s the nature of compromise. That’s the nature of democracy. That’s why the Framers of the Constitution created checks and balances in our government. That’s why they created two chambers in Congress and three branches of government. When you’re a leader in government, you don’t have the luxury of just drawing a line in the sand and walking away. You’ve got to be prepared to stay at the table and give something up.
I’ve just laid out what I and many of my colleagues are giving up in this proposal – our demand for a comprehensive, balanced plan to reduce the deficit. In exchange, I’m willing to accept a plan that includes more cuts than any other plan on the table. These are cuts that 40 of our colleagues on the other side of the aisle have already supported.
This is a plan that neither side is going to love, but both sides should be able to accept. It gets the job done. Now WE have to get the job done. I urge adoption of this compromise.
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