I rise today, as have so many other senators, because I’m concerned. I’m concerned about what I have been hearing about the threat of default has now just over three weeks away – what I have heard both here in Washington and in my home state of Delaware. This looming default crisis is one of the most grave and most predictable threats for our economy and our country that I have ever seen, and it’s no longer floating in a distance over the horizon, something we can debate academically, something whose impact we may yet avert. It is here. We are on the edge. Given the difficulties this body can have in moving something through in a matter of days, we are very close to the absolute last day when we can consider options and a path forward. Default is right before us, and it must be dealt with.
I rise today not to add to the political rhetoric. There has certainly been plenty of that in the last few days. Nor do I rise to try to illicit panic or fear in the broader public. I rise because the folks of Delaware, the people from whom I have been hearing just don’t know what to believe. They know our deficit spending and our national debt are out of control, and they are deeply concerned. That’s good. I share that concern. I share that commitment to making certain that we reduce our spending and we deal with our deficits, because deficits and debt of the size that we have today can harm our economy fundamentally. They are a basic challenge to our national security, to our success, to our growth going forward. But I also rise because there is no faster way to ensure that our economy will never get back on track, that our country will never reach its full potential than to let our nation default on its financial obligations.
We need to deal with this default crisis, Mr. President, in a responsible and pragmatic way to create a real and lasting solution. We must, in my view, restore certainty to our markets to help get our economy going again. What do we hear from business? From businesses large and small all over the country: certainty. We need predictability; we need certainty in the markets. Nothing is creating uncertainty more than this grinding lack of resolution to the vote to raise our debt ceiling. I want to take a look at a few of the myths that I hear at home that I think need to be cleared up.
First, some members of this body and in the other house of Congress, some folks running for president, some people in the press have suggested that a default will cause only minor economic disruption, if any at all. Economist after economist, think tank after think tank, study after study have shown in the last few weeks that nothing could be farther from the truth. There are predictable consequences of default that will affect every American, Americans in every state, of every income level. And more than any, I worry about the working families, or those currently out of work, who are already struggling through the greatest recession we have known in my lifetime.
One report suggests 640,000 people will lose their jobs in the months after default. Economists confirm that the cost of home mortgages, of car loans, of interest rates will go up for everything. The cost of food, of gas, of everyday items for families all over this country will go up, in real and concrete ways, and, more importantly, if we default on America’s mortgage, the impact in terms of the increased cost of borrowing for our whole country and for all of our families won’t just be brief. It will be lasting, because it will hang with us on our credit score as a nation for years. So, to the folks watching, if you think it’s difficult to find a job or to help grow a business, to help deal with the daily cost of living now, just wait until we default on America’s mortgage and the cost of borrowing funds to do anything, to create new jobs or help pay your bills as a family goes up. Default will have real and lasting economic consequences that will haunt this economy and haunt the working families of this nation for years.
The second myth, Mr. President, is that we can just stop spending money without real consequences. Some in this very chamber have suggested that, when we get to August, there is still plenty of money coming in to service the debt, so there is no real threat of default, and what we need to do is a relatively simple exercise of just deciding which things we will stop paying. The second myth goes that the Treasury Department will just start picking winners and losers. They will pay Social Security but forgo Medicare. They will pay our troops but pink slip our federal civilians. They will fund the Pentagon but forget the Department of Education. Never mind the ethical quandaries, the long-term disservice such action would have on our economy and our country.
In fact, the truth is, it’s also not even clear they have the legal authority to do so in the Treasury Department, to pick these winners and losers on a week-by-week basis. To just choose one example of the studies that have been done on this myth, that we can simply pay the debt service and a few big things and the consequences of the rest would be fine, according to the Bipartisan Policy Center, beginning in August, if we continue to make payments – obviously, on interest on the debt, but also on Social Security, Medicare, Medicaid, all defense contractors and unemployment insurance – on the really important things, and we just stop paying the rest. Our troops on active duty, all of our veterans’ programs, all of law enforcement, including, for example, the FBI, the whole federal court system, the FAA, which monitors air traffic, the FDA, which inspects food quality and safety and a host of dozens and dozens of other federal programs would come to a halt within days. So the consequences to the safety of our families, to the strength of our economy, to the confidence of our country, to our role at home and abroad would in my view be tragic, almost catastrophic. So even if we could avoid, technically, default for a few days or weeks by continuing to service our debt, the costs and consequences of these other easy choices would be dramatic, difficult, and lasting. According to Steve McMillan who was recently quoted on this topic – the former OMB Deputy Director under President Bush – “I would say the options Treasury has if the debt limit is not raised are all very ugly.”
Let me give you a third myth. As I was talking with some small business owners in Delaware over the past week, some suggested that they really felt we needed to go ahead, take the tough medicine of defaulting and cut up the President’s credit card, stop the President from spending. And while I share their concerns about the very real and very significant threat posed by our deep deficits and share the view that we must cut spending, as all of us who are Democrats on the Budget Committee have said now publicly, we’re committed to a balanced approach that significantly cuts federal spending. The metaphor of cutting up the credit cards is wrong. Not just wrong – it’s desperately wrong and misleading.
Our nation defaulting on its debt is not like cutting up the credit cards and stopping the future spending. It’s much more like defaulting on a mortgage. It hurts our credit rating and hinders our ability to borrow. As we have been told before, every one percentage increase in interest rates will cause our national debt to go up $1.3 trillion over ten years. According to some economists, increased interest rates could last for a decade or more. No, the obligations that come due August 2 are the obligations that have already been undertaken. As Senator Harkin said before me, it is Republicans, both the President and Congress, Democrats, both President and Congress, over the last decade who have moved us into a bigger house as a country. It is the cost of two wars, the cost of an expanded Medicare Part D, the cost of an expanded investment in our country, the cost of this bigger house that is now coming due. And for us to stop paying that mortgage would have the same consequences for our country as it would for any family, because when you default on your mortgage it’s not like cutting up a credit card. It affects your credit rating, it affects your ability to borrow, it affects your ability to do anything more for your family for years to come. So, too, would the consequences be for this country, and, in my view, we can’t afford to let our country become a bad investment.
Last, some have suggested that August 2 is not a serious deadline, that somehow Secretary Geithner must have some other rabbit in the hat or some escape hatch. Back in January, Secretary Geithner sent a letter to all of us in Congress suggesting we would, in fact, run out of money on May 16 and the government, the Treasury Department, would then have to start taking extraordinary measures to avoid default. In fact, he detailed in six pages all the extraordinary measures that would be required, and he was right, almost literally to the day when that transition occurred and when those extraordinary measures needed to be deployed. The time runs out August 2, but if you don’t believe the deadlines for some reason presented to us by our very own Secretary of the Treasury and the Treasury Department, just look at what the three bond rating agencies are already saying about the impending default. Moody’s, S&P, and Fitch have all threatened to downgrade America’s rating. From AAA, the most secure and stable in the world, S&P suggested last week, to D, to junk bond status.
Mr. President, I suggest America is not a junk bond nation. It puts us at risk, as a nation, as a people, as an economy when we are mentioned in the same sentences as Ireland, as Greece, as Italy, as countries currently wrestling with fundamental failures to meet their obligations as a country, and we are better than that.
All of us in this chamber, all of us, Mr. President, are challenged to come together and to put our economy and our country back on solid footing, to restore certainty to the markets, to give confidence to retirees, to families raising children, to small businesses about getting serious about putting a plan on this floor next week and passing it. Because, frankly, if we allow this country to default on its sovereign debt, to fail to meet its moral commitment, both financial and to the people of the United States, the consequences will be desperate and lasting.
Mr. President, I suggested a few weeks ago that we should consider seriously the Bipartisan Policy Center’s proposal, so-called SAVEGO, which would pick up where the PAY-GO discipline of the 1990’s started and modernize it for our current situation. If we cannot get a comprehensive, $4 trillion balanced deal together to this floor and passed, let us at least get a down payment and enforce a budget mechanism that would ensure that comprehensive deal is accomplished over the next decade. SAVEGO, which I recommend to everyone in this body, would lock in savings over the next decade, force both parties to stay at the table, and urge us to meet the targets that we all know we need to meet, to reduce our deficits, to stabilize our debt, to strengthen our country and to move past this tragic, narrow debate over August 2 and our nation’s mortgage.
We need, Mr. President, to focus not on the next election cycle, not on the partisan back and forth that might win one party over another, one person over another advantage in this chamber or the other for 2012, but we need instead to focus on the next generation, on the future. The only way forward, in my view, is to honor our moral commitments as a nation, to the men and women who rely on Medicare and Medicaid and Social Security, on the safety of our troops and on the investments we make in the future, and to continue to honor our obligations as a nation. To do anything less is to dishonor the sacrifice of those who have served us in the past and to ignore the very real needs of the working families all over this country who look to us for leadership and sacrifice to put us on a sustainable path forward.
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