Increasing The Statutory Limit On The Public Debt

Floor Speech

INCREASING THE STATUTORY LIMIT ON THE PUBLIC DEBT -- (Senate - January 20, 2010)

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AMENDMENT NO. 3301 TO AMENDMENT NO. 3299

Mr. THUNE. Mr. President, I have an amendment at the desk and I ask unanimous consent for its immediate consideration.

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Mr. THUNE. Mr. President, we entered into this debate about the debt limit today. I appreciate the comments of my colleague from New Hampshire with respect to the overall picture of our financial and fiscal condition in the country right now. I think it is important to put that context out there because we are debating now a substitute amendment that the Senator from Montana is offering on the debt limit increase. I think that was originally proposed in the $650 billion range. We are now talking about tripling that--a $1.9 trillion increase in the debt limit--after having just voted on raising the debt limit before we went out for the Christmas holiday by about $290 billion.

So we have this proposal on the Senate floor that would increase the total amount of indebtedness of the U.S. Government by $1.9 trillion. As the Senator from New Hampshire very well pointed out, we are looking at deficits now into the foreseeable future that exceed $1 trillion. It doesn't look like in the 10-year window in which we do budgeting in the Senate that we are ever going to have a year where we don't have a deficit that isn't in the $1 trillion range. We had a $1.4 trillion deficit last year and will have another $1.2 trillion deficit this year. We keep racking up more and more debt that gets passed on to future generations and taxpayers.

As the Senator from New Hampshire pointed out, for admission into the European Union there are a couple of key thresholds. One is debt as a percentage of GDP, which is 60 percent, which is the threshold for admission into the European Union, and deficits, which is about 3 percent. He pointed out very effectively that we are at a threshold in this country that exceeds dramatically the deficit, the GDP threshold that wouldn't even allow us to get into the European Union, and we are going to blow by the debt to GDP threshold in the next year, which is 60 percent to GDP.

My point is, we are getting in perilous territory when it comes to the confidence and trust the American people have in the Federal Government's ability to manage responsibly and exercise fiscal discipline with their tax dollars. We are also getting to a point where I think those who are acquiring U.S. debt--and by that I mean the Chinese who, of course, are a big holder of U.S. debt--get to start saying: If we are going to continue to buy this debt, we are going to get a higher return. The higher our debt goes, the more risk they take on.

It is a fundamental rule of economics that we all learned that there is a corresponding relationship between risk and return. If an investor is going to assume more risk, they are going to demand a higher return. What we are doing now by piling up more debt is saying to the people who would buy that debt, the investors out in the world or in this country is, this is becoming a more risky proposition for you. As we pile up more debt, they are going to start saying: OK, if we are going to buy that debt and finance your spending into the future, we are going to need a higher return. That means higher interest rates.

Of course, when you start seeing Federal Government debt go up in terms of interest rates, generally what happens is other interest rates in our economy will go up as well. So you will start seeing student loans, for example, and homeowners and small businesses all being impacted by higher interest rates as a result of what inevitably happens when you run these kinds of deficits year after year and add as much as we are to the Federal debt.

We are not showing any evidence that there is a willingness to restrain that. In fact, if we look at just the last year--of course, the $1 trillion stimulus bill sort of started off the spending. Then since then we have had an omnibus, or minibus, spending bill, both of which increased spending year over year by about twice the rate of inflation, and sometimes in excess of that.

But what we have seen now between fiscal years 2008 and 2010 are astronomical increases in the size of the Federal Government. If we start with the legislative branch appropriations bills between 2008 and 2010--that covers a couple of appropriations years--we are looking at a 17.3-percent increase. If we look at appropriations for the Interior and the Environment, it is an increase of 21.4 percent over that time period; appropriations for Commerce, Science, and Justice, an increase of 24.2 percent. Appropriations for Transportation and HUD increased a whopping 39.1 percent. The State and Foreign Operations appropriations bill beat even that and was increased by 48.7 percent.

Taken as a whole, the entire government grew by 16.8 percent during that time period. When I say that, I am talking between 2008 and 2010. We saw a 16.8-percent increase in the size of the Federal Government. That is just speaking to the appropriations bills over those 2 years. Of course, we all know that dramatically outpaces and dwarfs the rate of inflation and the growth we have seen in our economy over that time period.

What is even more notable is that none of those increases included the increased funding through the stimulus bill, which I mentioned was an additional $1 trillion. Of course, I am concerned that will be built into the budget baseline into the future, and we will see our appropriators assume that stimulus money is part of the baseline in spending.

Of course, those appropriations bills don't include this proposed stimulus 2 that we are hearing about: the bailouts of the banks, the insurance companies, and the car companies, or the $2.5 trillion expansion that would occur with a new health care proposal, or entitlement, in this country. So we have seen this dramatic increase in the growth of government and in spending in Washington, most of which is financed with borrowing.

Last year, in fact, 43 cents out of every dollar we spent in the Federal Government was borrowed. We cannot continue to sustain a pattern of borrowing 43 cents out of every dollar we spend. In fact, as American families and households and small businesses are having to tighten their belts, in Washington, DC, the spending continues unabated.

What I am hoping to do with this amendment is to at least demonstrate that, as an institution, the Senate is willing to say we are going to take some steps, no matter how modest they are--and I would say my amendment isn't going to go a long way toward eliminating this Federal debt, but certainly I think it demonstrates to the American people that we get it; we are hearing that they are uncomfortable with the massive amount of borrowing and spending and taxes going on here. Americans are going to pay for this in the form of higher taxes and in the form of higher inflation. As I said, it will be also in the form of higher interest rates on mortgages and small business loans and student loans and those sorts of things. So we have a responsibility to demonstrate to the American people that we are serious about getting our fiscal house in order.

The most recent example, of course, as I mentioned earlier, in this pattern of expansion of the Federal Government is the health care bill, which is in the process right now of discussions, evidently, between the House and Senate and the negotiations that are ongoing. It passed the House and the Senate before the Christmas holiday. I happen to hope that people will come to their senses and defeat this bill and that it would not emerge in the conference committee, and we can start over and do it the right way--in a step-by-step way, not in a way that expands the size of government by $2.5 trillion.

That being said, the $2.5 trillion expansion of the Federal Government includes higher taxes, Medicare cuts, and also at the end of the day, according to the CBO, does very little for most people in this country to actually reduce the cost of their health care insurance.

In fact, what we have seen through studies done by CBO and by the CMS Actuary is that for most Americans, they are going to see, at best, their health insurance premiums stay the same. If they are in the individual market, they will see them go up. So the health care bill is an example of this runaway Federal spending. In fact, in the latter part of that debate, we got a response from the CBO to a question posed by the Senator from Alabama, Mr. Sessions, with regard to how the accounting is done in Medicare. One of the arguments we heard throughout the course of the debate was that it would extend the lifespan of Medicare. The question was posed to CBO: What happens with this additional Medicare tax and these Medicare cuts that would be imposed upon providers and senior citizens in this country?

The argument was always made that this will extend the lifespan of Medicare. Our question was, how do you spend money to create this entitlement program and pay for the health care expansion and say you are expanding Medicare? The answer that came back was that under the accounting convention regarding trust funds in a unified budget, in fact, there would be notes put into these trust funds that technically, legally speaking, would extend the lifespan of Medicare. But those dollars are also being spent on the new health care expansion.

From an economic standpoint, the conclusion you draw is that you cannot spend the same money twice. What they said is that you are spending the same money twice. You are double counting this money.

My view is that we have complicated this situation dramatically by this new health care entitlement program. That is why I think it is so important that we reverse course and start over and do this right, in a way that is step by step and gets at the fundamental issue most Americans are concerned about, which is the high cost of health care and providing access to more Americans and a higher quality of care.

I say all that as a background to get into this debate about the debt limit and to say I am very concerned. I also think most Americans are concerned about the amount of spending and borrowing and taxing that is occurring in Washington, DC. My amendment, very simply, says the Troubled Asset Relief Program that was enacted in late 2008--a $700 billion authority for the Treasury to use to help bring stability to the financial services industry in this country--would end. We would basically say that job, that mission, and that purpose has been served, completed. In fact, any unobligated funds should not be spent, and we should not allow TARP to become a sort of revolving loan fund, a political slush fund, to be used for all kinds of purposes. Most of the people who voted for it believed it would be used to bring stability to our financial services industry. We were told at the time that if we didn't do something, we were on the verge of imminent financial collapse, a financial meltdown. So many of us supported that at the time, with the belief that it would in fact be used to acquire the troubled assets that were on the balance sheets of a lot of financial institutions.

What happened is it evolved and morphed into something entirely different. It has been used to take equity positions not only in insurance companies but in auto manufacturers. It was suggested by the Treasury Department, whose interpretation is that they could use this for other purposes. We think the statute is plain about how these funds ought to be used. The Treasury has taken a different interpretation. When they chose to extend this program, it was set to expire at the end of December of last year. The Treasury Department chose to extend it. The assumption most of us made was that they have designs on how to use the funds. If they don't, certainly Members of Congress do.

I don't say that as a partisan statement. I think there are probably people on both sides who would love to know there is a few hundred billion dollars available to go toward some program they think is important. I am not saying anybody's ideas about government programs that might serve a particular constituency's needs are not important. They are important in the minds of individual Senators. But if we are thinking about the overall good of the country, we have to begin thinking about what we are doing.

This authority that was created under TARP--the $700 billion--is, if we don't shut it down, going to be used for all kinds of other ideas and purposes. We saw that most recently with the stimulus 2 bill that is proposed in the House of Representatives. They wanted to use TARP funding as an offset to pay for the new stimulus bill. We have seen proposals to use it for small businesses.

Frankly, I think we need to focus any efforts we make to create jobs in this country on small businesses because, after all, they create two-thirds or three-quarters of the jobs in our economy. Frankly, the TARP program wasn't designed to do that. It had a specific statutory purpose. That purpose is now being adulterated. It is used in all these different ways.

I happen to believe--and I hope a majority of my colleagues will as well--we should vote to end this program and not allow it to be used and misused and abused in a way that creates greater liabilities for the American taxpayers, creates more debt and borrowing because, after all, that is what it is.

The TARP authority is debt. When we talk about spending TARP money, it is not as if there is a big bank of money out there. What it means is that when TARP authority is used, we go out and borrow the money. Basically, we add to the Federal debt that we continue to pile up.

So the ENDTARP program--there is an acronym for everything around here--the ENDTARP program, Erasing Our National Debt Through Accountability and Responsibility Plan, or ENDTARP, is what my amendment embodies. Basically, we believe we ought to, as a body, as an expression of our willingness to, again, demonstrate to the American people we can get our fiscal house in order, vote to end this program.

I would like to illustrate, if I may, what I am talking about in graphic terms. This is a pie chart that shows the whole $700 billion that was authorized under TARP. The blue represents that the $545 billion--the latest information we have--has been spent or at least committed. That was as of January 6, 2010. What this side, the red, represents is the unobligated funds. The unobligated funds is a combination of both the authority that was not used, and that was about $155 billion, and payments that have been made back into the fund. That is about $165 billion. So we have about $319 billion--$320 billion in round numbers--of unobligated authority in TARP. What my amendment simply would say is, this amount of money cannot be spent. We would end TARP, and instead of allowing the program to continue through October of this year, at which point, incidentally, they don't have to shut down the spending--the spending can continue to go on. The program, in effect, would shut down in October of this year. But we believe that this unobligated money in here, that we ought to not spend it. When we do not spend it, it is money we do not have to borrow, and that reduces the overall amount of the Federal debt and the amount of debt we are passing on to future generations.

Again, this is a way of illustrating what we are talking about, what the amendment would do. The blue represents the amount that has been committed or spent as of January 6. The other side, the red, represents the amount that has not been used, authorized but not spent, and has been paid back--in other words, unobligated balances in the TARP fund of about $320 billion.

It is a fairly straightforward amendment. I hope a majority of my colleagues in the Senate will vote with me to say to the American people that we hear you; we do not believe using this program in a way that was not intended, that further aggravates a very serious fiscal situation for this country, ought to be allowed to continue.

I think the American people have made it clear that they are tired of the bailouts. There was a Wall Street Journal/NBC poll indicating that 53 percent of Americans are unhappy with the government's current role in the private sector. In fact, 65 percent of Americans are opposed to government intervention by taking a majority stake in General Motors.

Again, despite the original projections when TARP was signed into law that we were going to be made whole and this was actually going to generate additional revenue for the American taxpayers, I think we now know the estimates that are coming forward suggest we are going to lose money. The amount of money that was authorized for this program, we are not going to get it all back, but the one thing we can do right now is to cut our losses by making sure that these unobligated funds do not get spent, that they do not go onto the Federal debt, and that they do not go onto additional borrowing. When we are borrowing 43 cents out of every dollar spent in Washington, DC, we need to exercise some fiscal discipline.

I hope my colleagues will vote to support this amendment. My understanding is there will be a vote sometime tomorrow on this amendment. I hope to have another opportunity to speak to it tomorrow morning. I wanted to lay the amendment down, make my colleagues aware of it, and encourage them to support it.

I yield back the remainder of my time.

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