Restoring American Financial Stability Act of 2010
Floor Speech
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Mr. CORNYN. Mr. President, I continue to have deep concerns about the legislation we are debating. I mentioned some of those concerns last week, including the bailout provisions that still effectively remain in the bill and the so-called orderly liquidation process that could give some firms special treatment outside of the Bankruptcy Code.
I repeat my appreciation to Senator Sessions from Alabama for offering his amendment last week which would have corrected that. Unfortunately, it was defeated last Thursday, as most of the amendments have been.
At this time, I offer another amendment that would protect the American taxpayer from bailing out foreign governments. We all know that this scene, which we saw displayed across cable television and in the newspapers, is being played out now in Greece where literally a Greek tragedy is unfolding.
How did this happen? First, Greece's public debt was 115 percent of its gross domestic product, according to the International Monetary Fund. Putting that in context, according to the Congressional Budget Office report of March 2010, the public debt of the United States is currently 53 percent of our gross domestic product. However, the Congressional Budget Office, the official scorekeeper of the government, says, all else being equal--in other words, if nothing else happens--the baseline estimate for that debt in ten years will be 67.5 percent, up from 53 percent last year. Under the President's proposed budget, that number skyrockets to 90 percent of gross domestic product by 2020. While some may say here in America we are in relatively good shape because our debt is only 53 percent of our gross domestic product, the Congressional Budget Office estimates that under the President's own budget, that will soar from 53 percent of the gross domestic product to 90 percent of GDP by the year 2020, which makes that 115 percent number for Greece look not so much higher than what the American number will be come 2020.
Deficits are high in Greece for the same reason they are too high in the United States--too much government and too much reckless spending.
Similar to the U.S. Government, the Greek Government has been financing its operations by borrowing money. But over the last few weeks, the capital markets made clear investors--the people who buy that debt--do not trust the Greeks to be able to pay it back, hence, the need for these extraordinary bailouts by the International Monetary Fund.
But, again, the comparison is unavoidable. What happens if the United States does not change its current trajectory of going to 90 percent of our gross domestic product when it comes to our debt by 2020, as projected by the Congressional Budget Office? What do we do if we continue to borrow and spend? What do we do if China, for example--which is the primary country that buys that debt--either refuses to continue to finance our deficit spending and our debt or demands higher interest rates.
What is happening now in Greece with these kinds of demonstrations I do not think it takes a great imagination to say could happen in America if we are not more responsible in dealing with our out-of-control spending, our out-of-control debt--unless we say no to the President's proposed spending budget, which would grow that to 90 percent of our gross domestic product by 2020.
But back to my amendment. Why is it people are so upset about bailing out Greece, using the International Monetary Fund to do so? Well, I am referring to an article from the Associated Press entitled ``Europe bristles at paying for Greek retirement.'' Let me read a couple paragraphs:
In Greece, trombone players and pastry chefs get to retire as early at 50 on grounds their work causes them late career breathing problems. Hairdressers enjoy the same perk thanks to the dyes and other chemicals they rub into people's scalps.
Skipping down a couple paragraphs:
Like many [European Union] countries, the general retirement age in Greece is 65, although the actual average [retirement age] is about 61. However, the deeply fragmented system also provides for early retirement--as early as 55 for men and 50 for women--in many professions classified as ``arduous and unhealthy.''
So we see why people are reluctant, to say the least, to bail out Greece because of these reckless pensions that facilitate these early retirements under the thinnest of pretenses. But we know the European Union and the International Monetary Fund recently approved a $145 billion bailout for the Greek Government. Mr. President, $40 billion of that represents loan guarantees from the International Monetary Fund. Since the United States has funded about 17 percent of the IMF's budget, our share--that is, the American taxpayers' share--of that bailout would be at least $7 billion. That is right, U.S. taxpayers are on the hook to help bail out Greece to the tune of at least $7 billion.
We know a $1 trillion bailout fund is being discussed for other European nations. While the details are being discussed, once again, U.S. taxpayer funds could make their way through the International Monetary Fund to bail out irresponsible foreign governments.
As CNBC reported on Tuesday:
U.S. taxpayers could be on the hook for $50 billion or more as part of the European debt bailout, which is likely to be a close cousin to the strategy used to rescue the American financial system.
CNBC went on to say:
The entire bailout package has been nicknamed ``Le Tarp'' for its similarity to the Troubled Asset Relief Program that bailed out US companies with taxpayer-backed loans.
They are calling this bailout fund Le Tarp for a reason. Once again, billions
of dollars will be in the hands of government bureaucrats, and the U.S. taxpayer will be asked simply to trust those so-called experts who have let us down before and who seem to be making much of this up as they go along.
It is no surprise that 63 percent of respondents to a recent Rasmussen poll have said they oppose using U.S. taxpayer funds to bail out foreign governments. I am actually surprised it is only 63 percent.
American taxpayers should not be involved in bailing out foreign governments. As George Will pointed out last week in the Washington Post, Greece has a gross domestic product that is less than the Dallas-Fort Worth metropolitan area's. Greece is simply not, under any stretch of the imagination, too big to fail. If Greece defaults on its debt, then the European banks that bought the debt need do write it off. If the European governments want to bail out their banks or prop up their currency, let them do it without help from the American taxpayer.
American taxpayers simply should not be involved in this process. Our first priority should be to unwind all the bailouts we have, thanks to this administration, not to create new ones overseas.
Moreover, there is a good chance this Greek bailout is not even going to work; in other words, that we will not even be able to get our money back. It will not be a loan; it will be throwing more good money after bad.
The chief executive of the Deutsche Bank doubts the Greeks can even repay this debt. We have all seen pictures of these protests that have continued under the ``austerity measures'' that have now been imposed that the government was forced to make in order to secure the deal.
As one blogger recently put it:
It was the Greeks who gave us the word for democracy. They also gave us the words for demagoguery, tyranny, crisis and chaos.
That is what this photograph looks like: chaos as a result of uncontrolled spending and out-of-control debt.
What we are seeing is what Robert Samuelson calls the ``Death Spiral of the [Modern] Welfare State.'' He said: ``The reckoning has arrived in Greece, but it awaits most wealthy countries,'' including, I might add, the United States of America--unless we change our ways.
The President of the European Council put it this way:
We can't finance our social model anymore--with 1 percent structural growth we can't play a role in the world.
What my amendment--which will be among the four amendments voted on when we gather again at 5:30--does is, it says the American people are tired of bailouts, and Congress should protect the American taxpayer from bailing out foreign governments, particularly when we cannot get our money back afterwards.
My amendment would bring needed transparency and accountability to what the International Monetary Fund is doing with American taxpayer dollars, including the roughly $60 billion our country has already provided to the IMF over the years.
Specifically, this amendment would require the administration to look more closely at any proposed IMF loan to see if that country's debt exceeds its GDP; and when it does, as Greece's does, to certify to Congress that the loan will be repaid.
If the U.S. Executive Director of the IMF cannot certify to Congress that the loan will be repaid, my amendment would require the President of the United States to direct the Executive Director to vote against the bailout by the International Monetary Fund.
The logic of this amendment could not be more clear: Any country that owes more money than its entire economy produces is, by definition, a very bad credit risk, and the United States should not be loaning money to such a nation, unless we are absolutely confident our taxpayers are not subsidizing failure and will ultimately get their money back.
So I urge my colleagues to support this amendment. We must act quickly, so the amendment will apply to future bailouts of nations like Greece that have spent way beyond their means.
I yield the floor.
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Mr. CORNYN. Mr. President, I will make two points. No. 1: This amendment will help protect American taxpayers from bailouts of foreign governments. Greece is going to get $40 billion in loans from the IMF, out of which $7 billion is attributable to the contributions of the American taxpayer. They shouldn't have to do that unless we have an assurance we will be paid back.
The second point is that Greece's current public debt relative to its gross domestic product is 115 percent--meaning it owes more money than its entire economy produces.
Under the President's budget, in 2020, looking at the same metric for the U.S. Government--our debt will be 90 percent of our gross domestic product. If we are not careful, America will turn into Greece and need a bailout, except there won't be anybody there to bail us out, including the American taxpayer.
I ask my colleagues to support the amendment.
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