In Speech, Hatch Outlines Opposition to Debt Ceiling Increase
Utah Senator Says, “It is time to resist the siren song of cheap credit and put our focus back on the job at hand, which is to allow the private sector to create jobs and to get rid of the $1-trillion-plus deficits of the Obama Presidency; to get rid of our mountain of debt that surpasses the size of our entire economy; and to bring the size of our federal government back down to historical norms.”
WASHINGTON – In a speech on the Senate floor today, U.S. Senator Orrin Hatch (R-Utah), Ranking Member of the Senate Finance Committee, outlined his opposition to the President’s request to increase the debt limit by $1.2 trillion, pushing the national debt to nearly $16.4 trillion.
“We are on the edge of the cliff. And it is time to carefully, but deliberately, take a few big steps back. Rates may be low today, but they can turn on a dime. And, when they do, the outsized federal government that we currently have will suddenly be exposed as unaffordable. And when that day comes, our creditors can go on strike as quickly as they have in Europe,” said Hatch.
“Last summer we got a taste of what is to come when we received the first downgrade of U.S. sovereign debt in history from a major credit rating agency,” Hatch continued. “Americans can never be allowed to forget that this downgrade occurred under, and because of, this Administration’s fiscal stewardship. We cannot risk what are likely to be further downgrades in the near future by raising the debt limit.”
“It is time to resist the siren song of cheap credit and put our focus back on the job at hand, which is to allow the private sector to create jobs and to get rid of the $1-trillion-plus deficits of the Obama Presidency; to get rid of our mountain of debt that surpasses the size of our entire economy; and to bring the size of our federal government back down to historical norms,” concluded Hatch.
Below is the text of Hatch’s full speech delivered on the Senate floor this morning:
Mr. President, I would like to express my disapproval of the President’s request of a debt limit increase of $1.2 trillion, which would place the total limit just below $16.4 trillion.
The requested increase amounts to nearly $4,000 of additional debt for every American man, woman, and child; and the total debt limit being requested works out to over $50,000 per person. This would be a terrible burden to impose on our children.
For many in Washington, including the President, this debt limit increase is just a matter of fact necessity. Watching the mainstream media, many Americans might be surprised to even know that it was set to happen. But this is no small matter. This is not an inconsequential increase in federal spending.
Federal spending is already out of control. Our total debt is already greater than the size of our entire economy. And the debt-ceiling increase being requested amounts to nearly 8 percent of our entire gross domestic product — or GDP — and the total debt limit being requested amounts to over 108 percent of GDP, which would place us in worse shape than many of the Eurozone countries currently confronting a devastating fiscal crisis.
Given the recent experience in Europe, it is disconcerting to hear repeated calls by the grow-government-at-all-costs crowd to double down on failed government initiatives to stimulate the economy by borrowing even more. Rates are cheap, they say, so let’s continue riding the debt bubble as far as we can.
Mr. President, we should have learned from the housing bubble and the European sovereign debt bubble that bubbles pop rapidly and with great devastation. It was not long ago that the grow government crowd was mocking concerns about indebtedness in the Eurozone, taunting what they called the “bond vigilantes” and saying that there was nothing there to see.
Interest rates won’t go up. Don’t worry. Rates are low, so borrow and spend.
We know how this story ends.
It was not long ago that we saw housing market participants, lured in by the promise of an ever-bigger McMansion, being told: Don’t worry, rates are low and house prices never fall, and the government backs your mortgage, so there is no risk.
As outsized and highly speculative activity took place throughout the housing and financial sectors, Federal regulators ignored all warnings, failed to use their existing authorities to promote safety and soundness, and failed to do their jobs. To date, it is difficult, if not impossible, to come up with a single name of a regulator who lost a job. In fact, many in the top slots got promotions. Meanwhile, everything bad that exists in the housing market and in mortgage finance is blamed on the evils of private business. That’s a great way to deflect regulatory failure, but a terrible way to get private activity back into the housing arena.
The fact is, the housing bubble was caused by too much borrowing, and the folks that egged it on. And the results were not pretty. Global investors struck against mortgage-backed-securities issued in the United States, leading ultimately to a precipitous global strike on financial intermediation and massive government bailouts of financial institutions.
The experience with the housing bubble caused by mortgage debt is being replicated with the explosion of sovereign debt. The bond vigilantes did strike against profligate Eurozone countries and they precipitously demanded higher and higher interest rates to protect lenders from risks of default. This effectively shut entire countries out of the debt market. Entire countries face an inability to borrow at rates that they can sustain. Absent an ability to roll over debt, those countries have been forced quickly and violently into fiscal restructuring, immediate austerity, and, sometimes, into partial default.
The President’s most recent request to take on more debt follows the same bubble pattern that we know will lead to devastation and losses. I, for one, do not wish for us to continue flirting with catastrophe by encouraging bubbles with the fool’s gold that because rates are cheap we should borrow more.
We are on the edge of the cliff. And it is time to carefully, but deliberately, take a few big steps back.
Rates may be low today, but they can turn on a dime. And, when they do, the outsized federal government that we currently have will suddenly be exposed as unaffordable. And when that day comes, our creditors can go on strike as quickly as they have in Europe.
Last summer we got a taste of what is to come when we received the first downgrade of U.S. sovereign debt in history from a major credit rating agency. Americans can never be allowed to forget that this downgrade occurred under, and because of, this Administration’s fiscal stewardship.
We cannot risk what are likely to be further downgrades in the near future by raising the debt limit.
Mr. President, it is time to resist the siren song of cheap credit and put our focus back on the job at hand, which is to allow the private sector to create jobs and to get rid of the $1-trillion-plus deficits of the Obama Presidency; to get rid of our mountain of debt that surpasses the size of our entire economy; and to bring the size of our federal government back down to historical norms.
Federal outlays as a share of our entire economy averaged 18.6 percent over the last 40 years. Under the current administration, federal outlays represented 25 percent of GDP in 2009, 23.8 percent in 2010, and were estimated to have been 25.3 percent in 2011. The current administration has engineered a federal government whose outlays represent 25 percent — one quarter — of our entire economy. The last time federal spending represented such a large share of our economy was back in 1946, as the world began rebuilding after the ravages of World War II.
I guess this is what one of my colleagues meant when he said the other day that America is in good shape. Economic and job growth remain weak. But Washington, and the government jobs it funds, is doing just fine.
The Administration likes to talk about economic fairness — about the haves and the have nots.
But ultimately the people in the best shape in this economy are those who owe their livelihoods to the federal government and federal taxpayers. When the 99 percent are being taxed to fund and fuel an ever-growing Washington bureaucracy, we have what the President might call economic justice.
And there is no end in sight. After federal spending spiked in World War II, as the entire nation mobilized to defeat the Axis Powers, it quickly ratcheted down, with federal spending averaging 16.5 percent of GDP in the ten years that followed.
Yet with President Obama, the ratchet only moves in one-direction — up.
Equally of interest is the behavior of federal spending relative to the size of the economy in those Clinton years which many look back on as the golden age of fiscal correctness. While Democrats focus solely on the existence of budgetary bliss despite higher tax rates under Clinton, they typically fail to mention how the budgetary bliss was generated. It is difficult to deny the facts, and the facts include a reduction in federal outlays relative to GDP from 21.4 percent in 1993 to 18.2 percent by 2001, a 3.2 percentage point reduction. During those years government receipts relative to GDP did rise from 17.5 percent to 19.5 percent, a 2.0 percentage point increase. But it is impossible to deny that the budget bliss was largely generated by reducing the share of the economy accounted for by federal spending.
Of course, my friends on the other side of the aisle pledge allegiance to tax and spend economics. They wish to maintain a federal government, whose spending amounts to one-quarter of the size of the entire economy. To them, federal spending and big government are not problems; they are virtues from which good things trickle down from government to preferred classes of people.
They decry that a deep recession has caused government receipts as a share of GDP to fall below 15 percent and argue in panic that the decline is proof that taxes must be raised, while refusing to acknowledge that the non-partisan Congressional Budget Office projects that revenues as a share of GDP will rise with economic recovery. Federal revenues have averaged 18 percent of GDP over the past 40 years. They are projected by the CBO to reach nearly 19 percent of GDP in 2013; 21 percent in 2021; and 23 percent by 2035 under current law. Even under the CBO’s so-called alternative fiscal scenario, CBO puts revenues as a share of GDP at around 18.4 percent, higher than the long run average.
Congress and the President should focus on the things that they are capable of controlling.
Mr. President, federal revenues come from the economy, and as the economy recovers, CBO expects revenues to recover and rise above historical norms relative to the size of the economy. The President and his allies are putting the cart before the horse. They want to increase revenues, by raising taxes. But the real way to increase revenues is to promote economic growth.
Federal spending is something that Congress and the President have full control over, however. Every federal dollar spent comes because Congress and the President decided to spend it. Our deficits and debt are on an unsustainable path because of unsustainable spending. Yet with this debt limit increase, the President and his allies are confirming that they are comfortable with government consuming an ever-increasing share of the economy.
The President has made clear before that in the name of class-warfare, he is comfortable raising taxes regardless of whether those tax hikes generate revenue or decrease deficits and debt. And with his latest proposal to tax the so-called rich, he has shown again that he is willing to ignore the clear fact that we have a spending, not a revenue problem.
To tackle our spending problem, unsustainable government promises embedded in entitlement programs like Medicare, Medicaid, and Social Security must be reformed. There is no budget analyst on the planet who does not identify entitlement reform as key to getting the federal budget back on track. Yet over the three years of the Obama Presidency, there has been no plan — no plan — from the Administration to deal with entitlements.
The entitlement can is simply being kicked down the road and, to deflect attention from our real fiscal challenges, my friends on the other side of the aisle resort to the politics of division. Tax the evil banks, and all will be equal, just, and fair, they suggest. Tax millionaires and billionaires, no matter whether they are fat cats on yachts or small business owners, and all will be equal, just, and fair, they suggest.
This politics of division bears no fruit. It is an economic dead end. Yet it is elevated to the top of the President’s agenda to divert attention from our bloated federal government. The taxes on the so-called rich, or on evil financial institutions, or evil energy producers, or evil insurance providers have been promoted in the interest of fairness and equality.
Reducing income and wealth inequality is a laudable goal. Yet my friends on the other side of the aisle have NOT proposed new tax measures to generate greater income equality through the tax code. The numerous permanent surtaxes on the so-called rich or on energy producers or on financial institutions have not been offered with corresponding permanent reductions in taxes for others with lesser means. Rather, they have been offered to promote more government spending and a permanently larger government. They are permanent tax hikes used to pay for temporary stimulus, or taxes on businesses to fuel more spending or bailouts or government jobs.
Of course, no mention is made of what effects those taxes have on businesses or private sector job creation. No mention is made about the effects those taxes have on the returns on retirement portfolios of seniors, which contain stocks and bonds of the vilified banks and energy producers and insurance companies. The message to retired seniors in Sandy Utah is clear: you’ve been suffering for years through near-zero returns on bonds because of Federal Reserve policy. But now you will just have to take it on the chin when the value of your pension falls because the federal government needs to tax business to get more revenue for union construction jobs or stimulus or for bailouts of mortgages of speculative housing investors.
Mr. President, my friends on the other side of the aisle say they want more equality and more jobs, but do not offer tax proposals that would generate more equality through the tax code or a better environment for job creation. Instead, they want to tax the so-called rich to get money for things like high-paid infrastructure contractors, while fighting tooth-and-nail on behalf of their union constituencies to retain and even expand Davis-Bacon and Contract Service Act coverage which we know costs taxpayers money and stifles job creation. These types of schemes have nothing to do with equality. They have nothing to do with promoting as much job creation as possible. They have everything to do with the politics of division and with cronyism.
For every instance in the recent flurry of tax-the-rich surcharges offered by the other side, each corresponding spending idea has been clearly directed to appease Democrat constituencies — mostly unions — and to build up campaign-season talking points that say the only thing standing in the way of Democrats’ do-goodery is Republican refusal to tax some easily demonized group.
This might make for good politics. But it is no way to formulate fiscal policy. And it is no way to run a country.
At first, to pay for a massive new stimulus plan of the President, the Democrats wanted to limit deductions for people earning $200,000 or more, which in September of last year was evidently how Democrats defined who is rich.
Next came a proposed surtax of 5.6 percent on people earning $1 million or more to pay for the President’s stimulus scheme. I am guessing that the earlier definition of rich at $200,000 didn’t sit too well — or poll too well — with Democrats in high income jurisdictions in places like New York and California.
Next came a surtax of 0.5 percent on those earners to give funds to States to help pay mostly union workers.
Next came a surtax of 0.7 percent on those earners to help pay for a new Fannie- and Freddie-like government sponsored enterprise called an infrastructure bank.
Next came a permanent surtax of 3.25 percent on those earners for what was billed as a temporary payroll tax preference which, ironically, gives more to richer earners than it does to poorer earners, and gives nothing at all to the unemployed.
Next came a long-term surtax of 1.9 percent on richer earners, again for the allegedly temporary payroll tax preference.
Mr. President, the pattern is clear. Democrats settle on their stimulus spending plan of the week, find out how much it will cost, and then find out what surtax to slap on high earners, including business income recipients.
That is how we get tax proposals with rates of 5.6 percent, then 0.5 percent, then 0.7 percent, then 3.25 percent, then 1.9 percent, and who knows what comes next.
Never mind that businesses across this country have been clear that massive uncertainty from the current administration’s policies and proposals is holding back hiring, job creation, and the economy. Given the past few months of tax-rate-roulette being played by the Democrats, is it any wonder that families and businesses lack the confidence to take risks, make significant purchases, and grow the economy?
And never mind that the Joint Committee on Taxation has told us that approximately 34 percent of flow-through business income, which tends to be small business income, would be subject to Democrat surtax proposals.
But my friends on the other side of the aisle ask us not to mind the effects on job creators, even as the economy faces massive joblessness.
If we abide by the recommendations of the editors at the New York Times, who are in lock step with the Democrat party, we should not care about more taxes on businesses. Indeed, in a December 9 editorial last year, those tax policy experts told us that:
“…for any savvy business owner, a surtax would have no bearing on hiring decisions. If new workers are profitable before tax, they will be profitable after tax, even if the employer has to pay slightly more of the profit in taxes.”
This view perfectly encapsulates the understanding of the economy held by those who have never created a private sector job or worked to turn a profit. By this view, those rich business owners won’t even flinch if you increase taxes. After-tax profitability of hiring does not matter, evidently, especially when you view business earners as those evil rich.
Mr. President, I know that in certain circles it is fashionable to vilify business and hold the profit motive as the root cause of mega wealth. But the notion that business decisions, including hiring, will not be affected in the least by higher taxes is truly bizarre.
The ongoing vilification of private businesses in America is shameful. Hard working Americans who are by no definition rich, but who work in mortgage markets, in real estate markets, in securitization markets, in energy-production markets, and in financial markets have been hit with a blanket indictment from this Administration that they are wrongdoers. Of course, if they do wrong, they need to go to jail. But my experience with the American people is that, by and large, they play by the rules, seek to offer useful products to their buyers, and look only for fair rewards for their efforts. They do not deserve to be vilified by the President and painted as purveyors of tricks and traps to abuse their neighbors in order to buy yachts.
Again, anyone who breaks the law should go to jail. Any federal regulator who fails do their job should be fired. But the vast majority of Americans who operate and work hard and honestly in business should not be shamed for their work. It would be far more appropriate to shame lawmakers who set trips and traps in the tax code in order to get more money for the federal government to spend while falsely selling their schemes as paths toward equality.
Mr. President, while President Obama seeks to take attention away from his historically record high budget deficits, and federal spending that accounts for 25 percent of the economy, and his jobs deficit, and his Congressional relations deficit, by identifying some sort of “trust deficit” that he has with financial institutions, it is imperative that he and Democrats in Congress do not spend the rest of this year playing election-year politics. People need jobs, and the nation can’t afford to wait for the President and Democrats to get past November.
We need to stop the tsunami of job-crushing regulations, and the runaway regulatory agencies which continuously stretch their authority in order to intervene into the economy and crush job creation. We need to reduce the time needed for private-sector projects to clear the forest of regulatory and permitting red tape. We need to proceed, immediately, with known shovel-ready, job-creating, and environmentally safe projects like the Keystone pipeline. Despite having cleared years of reviews and oversight, and despite support from virtually all interests, including unions but excluding radical environmentalists, it is inconsistent for the President to say that he cares about American jobs while he prevents them from being created by approving the pipeline.
While the President needs to approve the Keystone pipeline, I wish to again express my disapproval of the administration’s federal spending pipeline.
Mr. President, the administration has lacked, for three years, any serious and coherent budget plan. The administration has refused to deal seriously, if at all, with tackling unsustainable entitlement spending. It wishes to continue to practice the politics of division in order to permanently enshrine a European-sized federal government that absorbs over one-fourth of the entire size of our economy.
Americans do not want this oversized government; Americans do not want or need job-stifling tax hikes; Americans do not need the federal government running their lives and making their choices. Allowing the debt limit to rise would only serve to promote things that Americans do not want and that Americans do not need.
Therefore, Mr. President, I disapprove of the President’s request for a $1.2 trillion increase in the debt limit, which would place the total limit at nearly $16.4 trillion. I urge my colleagues to similarly disapprove.
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