Default Prevention Act of 2013
Floor Speech
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Mrs. SHAHEEN. Madam President, we are now in the 11th day of this unnecessary government shutdown. Just as my colleague from South Dakota, Senator Thune, pointed out, there are some impacts in South Dakota as a result of this shutdown. We are seeing those very real consequences in New Hampshire as well, and I am sure the Presiding Officer is seeing those in North Dakota.
It has become clear to me by talking to people in New Hampshire that the longer the shutdown goes, the worse the impact on families, on small businesses, on people who need the services from this government.
But as difficult as the shutdown is, there is actually another crisis that looms on the horizon that would have even more disastrous consequences for our economy, and that is the possibility of a first-ever default on this country's debt.
For the first time ever, if we default, the country would not pay the bills it has incurred--the bills it has incurred because of decisions made by this Congress or previous Congresses.
As economists across the ideological spectrum have warned, the consequences of a default would be severe. We could see businesses stop hiring. That would have an impact, as we are already seeing as a result of this shutdown, on the economic recovery we are experiencing. Retirement accounts and families' nest eggs would lose much of their value in a very short time. Interest rates would rise, which would mean higher costs for consumers, for small businesses, and for the Federal Government, as we need to borrow. And consumer confidence, which is so important for small businesses and for the economy, would drop sharply.
Some people have suggested that these are scare tactics. But these consequences are very real, and we know that because we have been here before. In 2011, which was the last time we came close to defaulting on our debt, the mere prospect of that default was enough to have significant impact on our economy.
In late July and early August of 2011, the period that led up to the debt deal in 2011, the Dow Jones Industrial Average dropped 2,000 points. As a result American families saw their household wealth plummet by $2.4 trillion. We saw a sharp drop in consumer confidence, and by the way the current circumstances that we are in have seen a similar drop in consumer confidence over the concerns about the shutdown and the default.
In the last few weeks we have seen the biggest drop in consumer confidence since Lehman Brothers collapsed in 2008. Then in 2011 our credit rating was downgraded for the first time in America's history. The crisis in 2011 resulted in $1.3 billion in additional borrowing costs for the Federal Government, thereby increasing the Nation's debt.
So for all of those people who said we are not going to raise the debt ceiling, we are not going to pay the bills this country has incurred because we are worried about the debt and deficits we face, the fact is that action alone increased our debt by $1.3 billion.
There is no question that we need to get this country's debt and deficits under control. I think all of us who are here believe that. But the best way to do that is to reach a comprehensive long-term bipartisan agreement that looks at all areas of spending, that looks at the domestic side of the budget, at the defense side of the budget, at mandatory programs and at revenue.
Despite the partisanship that we have seen too much of here, I still think that kind of an agreement is possible and that is critical. Senator Thune talked about certainty for farmers who are not sure what is going to happen with the farm bill. But that kind of uncertainty is going across the economy for businesses, from whatever sector they are in, because people do not know what we are going to do here in Washington about dealing with this country's long-term budget.
As some of my colleagues have noted, the response to the financial crisis and the great recession led to a higher deficit. There is no question the country was in trouble. One of the ways we helped to address that was to increase spending on vital safety net programs, while revenues declined--to try to stimulate the economy, to put people back to work.
Those policies as well as the fiscal policies that were enacted over the past decade, including two wars, tax breaks for the wealthiest Americans, all of those things made the country's debt and deficits increase. Actually in the last few years we have seen significant progress to reduce spending and to narrow our deficit.
We put in place discretionary spending caps that have reduced spending by the Federal Government, and we let the tax cuts for wealthiest Americans expire which raised additional revenue. All told, we put in place approximately $2.4 trillion in deficit reduction. This has not been easy. There has been a lot that has been affected that I would not have chosen, but the fact is we are on a more sustainable budget path.
One of the best ways we can improve our budget outlook is by growing the economy, by focusing on jobs that boost revenue and decrease the need for social programs. While we certainly have more work to do on that front, consistent job growth has helped increase revenue and reduce our deficit.
Since this President took office, we have seen this country's deficit fall by over 50 percent. That represents a remarkable improvement, and all that is coming with the financial crisis and the recession that began in 2008. So just think about that. We have reduced this country's deficit by over 50 percent.
The Congressional Budget Office projects that our deficit will drop to 2.1 percent of GDP by 2023 from its current level of 4.2 percent. We have made great progress, and we are on a path to make even better progress. The budget that the Senate passed is a very good place to look at how we achieved additional savings and how we continue to grow our economy.
That budget would give us an additional $1.8 trillion in deficit reduction over the next 10 years. It would also make very important investments in our economy, in families in this country, in infrastructure, in business, in education. That is a conversation we need to have. I think we should go to a conference committee on the budget. It has been unfortunate that we have not been able to get agreement in this body to do that because we have a small group of people who keep preventing that.
But that is not really what I wanted to talk about this afternoon. What we need to do is, we need to get this government back up and running. We need to agree that we should pay the bills this country has incurred and not default. We are continuing to see, as I said when I started, the very real impact of this government shutdown on families and small businesses across New Hampshire and the country.
I talked earlier on the floor about some of the small businesses that have been affected in New Hampshire. But today I want to talk about some of the Federal employees who are affected. I heard from an employee at the Federal Correctional Institution in Berlin, NH. This is a medium-security prison. It is new. It has not even been completely staffed, and it does not have all of the inmates there yet. This is from one of the employees who is currently working there--without pay as she points out.
She told me that her husband had already seen his hours cut at his job. Now she says:
I sit in fear that I will not receive a pay check at all. I will not be able to pay my mortgage payment, my student loan payments, our vehicle payments, or any other debts. I also assume that my daughter's daycare is not going to accept an IOU. I also will not have the money to buy pellets for my stove or fuel for my furnace for the upcoming winter.
She is worried about the long-term mental and physical well-being of those who are working without paychecks at the prison because many of her colleagues are living paycheck to paycheck.
We have talked a lot about the courage and dedication that many of our Capitol Police officers showed on October 3 during the shooting incident here. It was extraordinary to see people put their lives on the line without getting paid. The same is true of people who are working at our Federal prisons. They are putting their lives on the line every day they go into work in a dangerous environment.
I heard from another furloughed employee of the prison. She said:
I am a single parent with two sons ..... My sons depend on me and only me. I have to pay for my sons' lunch and extracurricular activities, which keep him out of trouble and gives him something to do. I also have medication that my son and I need on a monthly basis which we cannot go without ..... The oil here in Berlin, NH, is absolutely high.
Berlin is in the north country of New Hampshire so it gets cold there in the winter. She concluded:
What are we going to say to the bill collectors? Can anyone answer that?
What kind of answers can we give to these people who are putting their lives on the line every day working for the government to protect all of us? Yet we are not giving them the paycheck that they earned.
I also heard from a furloughed employee with the Department of Agriculture in New Hampshire who is on furlough. She said:
It is an understatement to say I am a bit anxious and scared. I live from paycheck to paycheck.
She told me she is worried about going into debt as a result of this shutdown. She said, ``I love my job at USDA and feel I make a difference every day to make this a better world.'' She urged me to work with my colleagues here to get her back to work.
Those are just a few examples of the stories that we are hearing every day from people in New Hampshire who are affected by this shutdown. The consequences are very real and they get worse with every day that it goes on.
As bad as that is, the consequences of a default of this country refusing to pay its debt are even worse. While Social Security and Medicare have not been affected by the shutdown, that would change if we default. A default could delay or disrupt Social Security checks that are due to go out at the beginning of November. Medicare, Medicaid, veterans benefits, and military salaries, all of those could be affected by a default. According to the Treasury, delayed or disrupted payments would prevent 57.5 million Americans from receiving Social Security benefits in a timely manner and interfere with payments to 3.4 million veterans.
This could put the most vulnerable in jeopardy and prevent them from receiving the benefits they have earned. That is why the majority in both parties, in both Chambers in Congress, recognizes that defaulting on this country's obligations is not an option.
My former colleague and fellow Senator Judd Gregg, who is a Republican--and while we do not agree on everything, this is one issue we certainly agree on. In an op-ed published by The Hill newspaper he said that brinkmanship on default is:
The political equivalent of playing Russian roulette with all of the chambers of the gun loaded. It is the ultimate no-win strategy ..... A default would lead to some level of chaos in the debt markets, which would lead to a significant contraction in economic activity, which would lead to job losses, which would lead to higher spending by the federal government and lower tax revenues, which would lead to more debt.
In other words, as Senator Gregg said it so well: It is short-sighted and irresponsible. There is no doubt we need to keep working on a long-term budget for this country. But we have to do it in a way that is responsible. That is why I certainly hope that the Senate will be able to agree on the legislation that is currently before this body. I hope the House will come to the table. I hope we can all agree that allowing this country to default on our debt, to not pay our bills, would have disastrous consequences.
We are not going to be that irresponsible. We still have some time to get this done. Not long. So far the financial markets and the American people have been more than patient. Everybody is frustrated. Everybody understands that it is time for us to act and to act now.
I yield the floor.
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