Continuing Appropriationsby Senator John Cornyn
Posted on 2013-10-07
CORNYN. Mr. President, I agree with our colleagues that a
government shutdown is not the best way to do business around here. We
should get together--the President, the House, and the Senate--and we
should work this out, both the continuing resolution and the debt
ceiling, of which Secretary of the Treasury Jack Lew has said he will
basically run out of all of the extraordinary measures he can use to
avoid us reaching the debt ceiling--which, colloquially speaking, I
would say is the equivalent of maxing out your credit card, the Federal
Government's credit card.
But it is worth remembering that as James Baker, former Secretary of the Treasury, Secretary of State, with a distinguished record of public service going back many years--he recently noted in an article in the Wall Street Journal that since 1976 we have had 17 government shutdowns temporarily until differences between the parties, between the branches could be worked out. I hope we can do that sooner rather than later.
The truth is that there was a way out with regard to the shutdown, particularly when the House passed a piece of legislation that would maintain the spending limits at $988 billion, which was the same level the Senate majority had chosen, but it also attached two other provisions to it, one of which would have eliminated the carve-out for Congress for ObamaCare--in other words, the carve-out that treats Congress differently than the rest of the country. Our Democratic friends unfortunately voted against that provision. All Republicans voted to eliminate that carve-out.
The second was the delay in the penalties that would be applied to individuals who do not buy government-approved health insurance under ObamaCare. The President has unilaterally delayed for 1 year the penalties for employers who do not meet the requirements of ObamaCare. All we were asking is that the same consideration be given to hard- working Americans. If our friends across the aisle--or at least enough of them--had joined with us to vote for both of those provisions that came over with the House bill, the government would not be shut down, it would be operating. But that was the decision they made. I think they made a mistake.
But we know the government shutdown debate is now quickly becoming a debate over the broader subject of what we do about spending and debt, particularly what we do with regard to the debt ceiling I mentioned earlier. We have reached almost the top of our credit limit on the Nation's credit card, and President Obama is asking for another trillion dollars in spending, in debt limit. But the President differs from many of us in that he thinks this debt ceiling cap ought to be lifted by another trillion dollars without anything else attached to it. He thinks it ought to be automatic, even though we believe it is entirely appropriate--and the majority of times in the past, the debt ceiling increase has been accompanied by other long-term policy reforms. The President himself has agreed to these kinds of reforms in the past. But apparently this time he has drawn a line in the sand.
So now he believes, unlike the past, that Congress should act like a rubberstamp when it comes to raising the limit on America's credit card, our debt limit. Meanwhile, it seems our friends across the aisle also feel the House should be a rubberstamp for the Senate. All of this leads me to conclude that James Madison, the father of the Constitution, must be rolling over in his grave because he and others of the Founders were the geniuses who decided that it was the checks and balances from separated government--the executive and the legislative, the House and the Senate--that would best protect our freedoms and best prevent overreach by other branches.
But in a way I can understand why the President and the majority leader are refusing to negotiate and are saying ``it is my way or the highway.'' After all, the last time we had these kinds of major fiscal talks in advance of a debt ceiling deadline, the result was the Budget Control Act. That was 2011. That law produced, by default, real spending cuts and real deficit reduction. If you recall, that was where the supercommittee was created to try to negotiate a grand bargain. The supercommittee was unsuccessful, and the default was the Budget Control Act and the sequester, which automatically cut discretionary spending. Our friends across the aisle clearly think that was a big mistake. The President and the majority leader now are refusing to negotiate at all on the debt ceiling. They believe it ought to be rubberstamped.
Well, amidst all of the rhetoric and the finger-pointing, now Washington has erupted into something it does best, which is the blame game. I am afraid we have lost sight of our underlying debt problem.
Despite the short-term deficit reduction we have witnessed since 2011 due to the default position of the Budget Control Act, our long-term fiscal trajectory remains unsustainable. Last month the Congressional Budget Office projected that publicly held Federal debt is on course to exceed the size of our entire economy. By that point, again, under current law, the interest we have to pay to China and other foreign creditors that hold more than half of our debt will be 2\1/2\ times greater than the 40-year average. We know interest rates are extraordinarily and abnormally low because of the policies of the Federal Reserve. But can you imagine, for that $17 trillion in debt on which the U.S. Government would have to pay historic averages of interest to our creditors in order to get them to buy our debt, what impact that would have? Well, I will talk about that more in a moment.
If we continue down this road without adopting real reforms for our long-term fiscal challenges, we will condemn our children and our grandchildren to fewer jobs, slower economic growth, worse opportunity, and a much greater risk of a full-blown fiscal crisis.
In the event of a crisis, our safety net programs that we all care about for the most vulnerable in our country would be cut harshly and abruptly, as would [[Page S7258]] our ability to fund national security and other priorities.
Nobody wants that kind of a future. Nobody has to accept that kind of a future if we just do our job--not the President trying to go it alone again, not the Senate saying ``it is my way or the highway'' to the House, but by the House and the Senate and the White House working together to try to work our way through it.
But if we continue to rack up debt--another trillion is what the President wants to raise the debt limit--and if we continue to postpone the hard choices and leave it to others, we will move closer and closer to an eventual disaster. By contrast, if we were to take the responsibility now to reform our safety net programs, we could reform them gradually so that people would barely feel it. That will make it much easier to protect the Americans who need these programs the most-- our seniors and the most vulnerable in our society.
Of course, we cannot make any real progress as long as the President and the majority leader in the Senate refuse to negotiate. As I said earlier, Congress is not a rubberstamp. That is not the Constitution written by our Founders. The House of Representatives is not a rubberstamp for the Senate. We have been willing to compromise and negotiate. As a matter of fact, the House has sent over multiple bills. Every time a Member of the opposing party comes to the floor and talks about the National Institutes of Health's funding being cut off for children's cancer research, we have come down here and said: Well, let's pass the bill. Let's pass that appropriation.
When someone has said: Well, what about the veterans' disability claims that are stacking up and are not being processed as a result of the shutdown, the House has passed legislation. We have come to the floor and offered legislation that would allow us to address that problem, but we have been told no time and time again.
I ask unanimous consent for 4 additional minutes.
The ACTING PRESIDENT pro tempore. Without objection, it is so ordered.
Mr. CORNYN. Mr. President, we need to work together. That is the only way this is going to happen. We know it will happen. It is going to happen. The President cannot take the unsustainable position that ``it is my way or the highway and I will not negotiate,'' especially since he has done it before, especially since that is the only way our constitutional framework allows the resolution of problems. If we were to do--which we are not going to do--what the President and the majority leader have asked us to do, which is to raise the debt limit automatically without dealing with any of our long-term fiscal problems, we would simply be encouraging Congress and our policymakers to delay the tough choices and hard votes. We would be encouraging-- indeed, we would be enabling--this type of fiscal profligacy that has left us with a gross national debt of $17 trillion, which is about $53,000 for every man, woman, and child in America.
More than $6 trillion of debt has been added since President Obama became President of the United States. Yet the President seems to show absolutely no sense of urgency in dealing with it. That is despite his own fiscal commission, the Simpson-Bowles Commission, coming back in December 2010--that was a bipartisan commission he himself appointed-- they came back with their own policy prescription to deal with this problem. Republicans, some of our most conservative Members, and some of the most liberal Members on the other side of the aisle came together and they voted for the Simpson-Bowles Commission report in December 2010, but the President simply walked away from it.
Back in March, he told ABC News: We do not have an immediate crisis in terms of debt. In fact, for the next 10 years, it is going to be in a sustainable place.
That is what the President of the United States said last March. But that is not what his own bipartisan fiscal commission said in December 2010. That is not what the Congressional Budget Office says. As everybody around here knows, the Congressional Budget Office is the final authority on these matters. In their 2013 long-term budget outlook, on page 13, they have a couple of pages that I ask unanimous consent to have printed in the Record following my remarks.
It is entitled ``Consequences of Large and Growing Federal Debt.'' They did not say: We do not have an immediate crisis in terms of debt, and we are pretty much in a sustainable place for 10 years.
They said: The high and rising amounts of Federal debt held by the public that CBO projects for the coming decades under the extended baseline would have significant negative consequences for both the economy and the federal budget.
What were those? They said there would be less national savings and less future income. They said there would be pressure for larger tax increases and spending cuts to deal with this, particularly the phenomena of high interest payments that I mentioned a moment ago.
Again, because of the Federal Reserve's policies, it costs next to nothing for the Federal Government in terms of interest on our national debt, but when that goes back up to historic averages, to 4, 5 percent, it is going to cost trillions of dollars more for us to service the existing debt, not to mention the additional trillion the President wants to borrow.
What is that going to do? Well, that is going to crowd out other priorities such as NASA, which my colleague from Florida and I both think is an important national priority. I heard the Senator from Ohio say the same. But higher interest payments as a result of not dealing with this high debt are going to crowd out other important national priorities.
Finally, the Congressional Budget Office said there is a ``greater chance of a fiscal crisis.'' Specifically, what they are talking about is that as we pay more and more for interest on our national debt, we lose more and more control over our fiscal future. As we all know on a bipartisan basis, we have been told time and time again by the experts that when our creditors lose confidence in our ability to repay debt, there can come a breaking moment when all of a sudden we lose control and all of these things happen, which we can avoid if we deal responsibly today.
In other words, the President seems content to let one of his successors deal with the problem of our rising national debt--that is only, I would add, if we get lucky enough to postpone the kinds of crises and problems CBO and Simpson-Bowles project that long. The President obviously has other priorities, but I want to remind him what his own former Chairman of the Joint Chiefs of Staff, ADM Mike Mullen, said when he was asked about the Nation's biggest threat to our national security.
He said it was the national debt. The President himself has echoed those comments, but the President is still sitting on the sidelines and still takes the untenable position that he is unwilling to negotiate. At a time when the country needs genuine leadership, he is nowhere to be found.
Until that changes, we are not going to get any closer to where we need to be sooner, rather than later, and that is a true bipartisan compromise.
I ask unanimous consent to have printed in the Record the article: ``Consequences of Large and Growing Federal Debt.'' There being no objection, the material was ordered to be printed in the Record, as follows: [From the 2013 Long-Term Budget Outlook, Sept. 2013] Consequences of Large and Growing Federal Debt The high and rising amounts of federal debt held by the public that CBO projects for coming decades under the extended baseline would have significant negative consequences for both the economy and the federal budget. Those consequences include reducing the total amounts of national saving and income; increasing the government's interest payments, thereby putting more pressure on the rest of the budget; limiting lawmakers' flexibility to respond to unexpected events; and increasing the likelihood of a fiscal crisis.
Less National Saving and Future Income Large federal budget deficits over the long term would reduce investment, resulting in lower national income and higher interest rates than would otherwise occur. The reason is that increased government borrowing would cause a larger share of the savings potentially available for investment to be used for purchasing government securities, such as Treasury bonds. Those purchases would ``crowd out'' investment in capital goods, [[Page S7259]] such as factories and computers, which make workers more productive. Because wages are determined mainly by workers' productivity, the reduction in investment would also reduce wages, lessening people's incentive to work. In addition, both private borrowers and the government would have to pay higher interest rates to compete for savings, and those higher rates would strengthen people's incentive to save. However, the rise in private saving would be a good deal smaller than the increase in federal borrowing represented by the change in the deficit, so national saving would decline, as would private investment. (For a detailed analysis of those economic effects, see Chapter 6.) In the short run, though, large federal budget deficits would tend to boost demand, thus increasing output and employment relative to what they would be with smaller deficits. That is especially the case under conditions like those now prevailing in the United States--with substantial unemployment and underused factories, offices, and equipment--which have led the Federal Reserve to push short- term interest rates down almost to zero. The effects of the higher demand would be temporary because stabilizing forces in the economy tend to move output back toward its potential level. Those forces include the response of prices and interest rates to higher demand, as well as (in normal times) actions by the Federal Reserve.
Pressure for Larger Tax Increases or Spending Cuts in the Future Large amounts of federal debt ordinarily require the government to make large interest payments to its lenders, and growth in the debt causes those interest payments to increase. (Net interest payments are currently fairly small relative to the size of the federal budget because interest rates are exceptionally low, but CBO projects that those payments will increase considerably as rates return to more normal levels.) Higher interest payments would consume a larger portion of federal revenues, resulting in a larger gap between the remaining revenues and the amount that would be spent on federal programs under current law. Hence, if lawmakers wanted to maintain the benefits and services that the government is scheduled to provide under current law, while not allowing deficits to increase as interest payments grew, revenues would have to rise as well. Additional revenues could be raised in many different ways, but to the extent that they were generated by boosting marginal tax rates (the rates on an additional dollar of income), the higher tax rates would discourage people from working and saving, further reducing output and income. Alternatively, lawmakers could choose to offset rising interest costs, at least in part, by reducing benefits and services. Those reductions could be made in many ways, but to the extent that they came from cutting federal investments, future output and income would also be reduced. As another option, lawmakers could respond to higher interest payments by allowing deficits to increase for some time, but that approach would require greater deficit reduction later if lawmakers wanted to avoid a long-term increase in debt relative to GDP.
Reduced Ability to Respond to Domestic and International Problems Having a relatively small amount of outstanding debt gives a government the ability to borrow funds to address significant unexpected events, such as recessions, financial crises, and wars. In contrast, having a large amount of debt leaves a government with less flexibility to address financial and economic crises, which in many countries have been very costly. A large amount of debt could also harm a country's national security by constraining military spending in times of crisis or limiting the country's ability to prepare for such a crisis.
A few years ago, the size of the U.S. federal debt gave the government the flexibility to respond to the financial crisis and severe recession by increasing spending and cutting taxes to stimulate economic activity, providing public funding to stabilize the financial sector, and continuing to pay for other programs even as tax revenues dropped sharply because of the decline in output and income. If federal debt stayed at its current percentage of GDP or grew further, the government would find it more difficult to undertake similar policies in the future. As a result, future recessions and financial crises could have larger negative effects on the economy and on people's well-being. Moreover, the reduced financial flexibility and increased dependence on foreign investors that would accompany a rise in debt could weaken the United States' international leadership.
Greater Chance of a Fiscal Crisis A large and continually growing federal debt would have another significant negative consequence: It would increase the probability of a fiscal crisis for the United States. In such a crisis, investors become unwilling to finance all of a government's borrowing needs unless they are compensated with very high interest rates; as a result, the interest rates on government debt rise suddenly and sharply relative to rates of return on other assets. That increase in interest rates reduces the market value of outstanding government bonds, causing losses for investors who hold them. Such a decline can precipitate a broader financial crisis by creating losses for mutual funds, pension funds, insurance companies, banks, and other holders of government debt--losses that may be large enough to cause some financial institutions to fail.
Unfortunately, there is no way to predict with any confidence whether or when such a fiscal crisis might occur in the United States. In particular, there is no identifiable tipping point of debt relative to GDP that indicates that a crisis is likely or imminent. All else being equal, however, the larger a government's debt, the greater the risk of a fiscal crisis.
The likelihood of such a crisis also depends on the economic environment, both domestic and international. If investors expect continued economic growth, they are generally less concerned about debt burdens; conversely, high debt can reinforce more general concern about an economy. In many cases around the world, fiscal crises have begun during recessions and, in turn, have exacerbated them. In some instances, a crisis has been triggered by news that a government would, for any number of reasons, need to borrow an unexpectedly large amount of money. Then, as investors lost confidence and interest rates spiked, borrowing became more difficult and expensive for the government. That development forced policymakers to either cut spending and increase taxes immediately and substantially to reassure investors, or renege on the terms of the country's existing debt, or increase the supply of money and boost inflation. In some cases, a fiscal crisis also made borrowing more expensive for private-sector borrowers because uncertainty about the government's response to the crisis reduced confidence in the viability of private-sector enterprises. Higher private-sector interest rates, combined with reductions in government spending and increases in taxes, have tended to worsen economic conditions in the short term.
If a fiscal crisis occurred in the United States, policymakers would have only limited--and unattractive-- options for responding to it. In particular, the government would need to undertake some combination of three approaches: restructuring its debt (that is, seeking to modify the contractual terms of its existing obligations), pursuing inflationary monetary policy, and adopting an austerity program of spending cuts and tax increases. Thus, such a crisis would confront policymakers with extremely difficult choices and probably have a very significant negative impact on the country.
Mr. CORNYN. I yield the floor.
The ACTING PRESIDENT pro tempore. The Senator from Florida.