September 26, 2013
Sean Neary/Meaghan Smith 202-224-4515
Baucus: Debt Ceiling Brinksmanship Must End, Pitting Seniors, Veterans Against Each Other Over Funding Not the Answer
Floor Statement as Prepared for Delivery
On September 26, 1987 — 26 years ago, this very day — President Reagan faced a Congress playing politics with the nation’s debt ceiling. Knowing the catastrophic consequences default would have on America’s economy, President Reagan addressed the nation.
Speaking from the Oval Office, he said, quote: “Congress consistently brings the government to the edge of default before facing its responsibility.”
He warned, “This brinkmanship threatens the holders of government bonds and those who rely on Social Security and veterans benefits. Interest rates would skyrocket, instability would occur in financial markets, and the federal deficit would soar.
“The United States has a special responsibility to itself and the world to meet its obligations.”
That was a pretty stern warning. While spoken more than a quarter century ago, President Reagan’s words still ring true today. I hope my colleagues listen to those words of reason. I hope my colleagues in the House of Representatives heed the warning from President Reagan about using the debt ceiling for "brinkmanship."
As we know, the federal government hit its debt limit on May 19. For the past 130 days, the Treasury Secretary has been using what are known as "extraordinary measures" to continue funding the government. We are running on borrowed time, but those extraordinary measures will be used up by October 17. At that point, we will have exhausted every measure. Default will occur unless Congress acts to raise the debt limit.
There will be much debate in the coming days on how to deal with the debt limit. The House CR — which we have before us today — contains a proposal some claim would avoid default.
This is a fiscally dangerous plan that gives the Treasury Secretary the unprecedented power to prioritize U.S. payments once the debt limit is surpassed — in short, the power to pick and choose which bills to pay.
The House CR identifies two specific payments as priorities — Social Security and the interest to U.S. bondholders. We are all familiar with Social Security and the importance of its funding, but the American people many not be as familiar with the principal and interest on U.S. bonds. This is the payment to countries that hold our debt, countries like China, Japan, Russia and Saudi Arabia.
The House CR categorizes the interest to these foreign bondholders as “a must-pay bill.” They leave all other obligations of the federal budget to be paid only by the revenue Treasury has on hand on any given day. Critical programs would be left fighting for the remaining scraps of funding.
In effect, the House proposal to prioritize payments would put the interests of countries such as China, Russia and Saudi Arabia ahead of the interests of students, seniors and America’s veterans.
This proposal makes no sense. Its priorities are out of order. Here are just a few of the programs that would compete for funding under the House plan:
- Veteran’s benefits
- Child Nutrition
- Military Salaries
- Military Operations and Maintenance
- Medicare payments to Doctors and Hospitals
- Student Loans
- Highway funding
- Funding for Air Traffic Controllers
- Unemployment Insurance
- And Tax Refunds
Can you imagine the result of the House proposal? Medicare beneficiaries will be pitted against disabled veterans. Students receiving Pell grants would be up against patients receiving medical care. Doctors conducting cancer research would be pitted against agents patrolling our borders. The chaos that would ensue is unimaginable.
When this scheme was first proposed during the debt limit debate in January, I compared it to the movie “The Hunger Games.” The sequel to “The Hunger Games” is not due out till November, but we can now see the coming attractions in the House CR.
Their plan for debt prioritization would pit one program against another in a fight for survival.
Under this ill-conceived plan, the Secretary of Treasury would be given unprecedented power to decide which programs are funded and which are eliminated.
No such power should ever be placed in the hands of any Treasury Secretary, regardless of party affiliation. And no member of Congress who believes in our system of checks and balances can honestly advocate for this idea to stand.
Finally, this House proposal is wrong for the country because it ignores the progress we’ve made over the past two years to reduce America’s deficits and debt.
With the adoption of the Budget Control Act in 2011 and the fiscal cliff agreement earlier this year, deficits are falling. Debt has been stabilized.
Together with interest savings, these actions will cut the deficit by $2.8 trillion over the next ten years. Add in the savings from winding down operations in Iraq and Afghanistan, and the total deficit reduction reaches almost $3.7 trillion over ten years. These are real savings. All this progress must not be ignored.
I agree with many of my colleagues that even more can be done to reduce the deficit and promote economic growth, but those actions should be separate from the debt limit debate.
We are in no position to play games with the economy. It is completely irresponsible to threaten default on the debt.
Since 1789 this country has always honored its obligations. Even when the White House and the Capitol were burned to the ground in 1814, America still honored its debts.
And yet I heard a senator say last week that failing to raise the debt limit is quote, “no big deal.” No big deal? Really?
Have people here forgotten the summer of 2011? Have people forgotten what happened when Congress failed to address the debt limit decisively?
I remember what happened. The dysfunctional debt-ceiling debate led to the first ever downgrade of America’s credit rating. I remember what happened. The stock market plunged 635 points the day after the S&P downgrade. During that two-week trading period, it fell by 2,000 points. Consumer confidence dropped even lower than it did in the heat of the 2008 financial crisis, and it took nearly a year to recover.
Worst of all was the impact on jobs. During the months that Congress was fighting over the debt limit, job creation fell by nearly 50 percent.
And remember, Congress still raised the debt ceiling without defaulting. The political brinksmanship alone did all that damage to our economy.
That cannot happen again. We cannot let that happen again. Time is running short. We need to stop playing games. This “whale of a fight” is getting us nowhere. Enough with the threat of default. Enough with the schemes to prioritize payments.
As President Reagan said, “The United States has a special responsibility to itself and the world to meet its obligations.”
It’s time we accept our responsibility. It’s time for us to work together. It’s time to get the job done.