Statement of Senator Michael B. Enzi
On the Debt/Deficit Crisis
July 30, 2011
Mr. President. It is disappointing to be here today addressing the United States Senate on a topic that we should have dealt with months ago. Our country is in a financial crisis. Erskine Bowles, the co-chairman of the Deficit Commission, coined the situation we face as, “the most predictable economic crisis in history,” and yet, there is no clear path forward to deal with both the short term need to raise the debt limit and the long term need to get spending under control. I’m disappointed we have made this discussion about the debt ceiling instead of on ever increasing spending. When you spend beyond your means, you have to cut back!
The plans we are considering at this stage in the debate are plans for the next year to two years. While there is merit in making the spending cuts these bills make, they are not the ultimate solution. We need more significant action. We need to move forward with something BOLD. My Republican colleagues and I have proposed such plans. I have proposed a solution that would cut just 1 penny from every dollar we spend for 6 years and then cap spending at the historical amount of revenue we take in during the 7th year. In the 8th year, we would have a balanced budget.
Unfortunately, my colleagues on the other side of the aisle refuse to even debate measures like my penny plan or the Cut, Cap, and Balance Act or even the plan put forward by Speaker Boehner. At the same time they refuse to debate these measures, they refuse put forward their own plan for long term structural changes. They are only willing to debate plans that make changes in the short term, and so, we are stuck here debating a plan that is deeply flawed.
I think it is important to look at where the debate is today versus where it was when President Obama was sworn in. It is clear that we have come a long way from where we were at when President Obama took office.
In 2009, Democrats in Congress passed a so-called economic stimulus bill that cost $1 trillion. To pay for it, we borrowed that money, and as the unemployment numbers prove, all that borrowing didn’t solve our economic problems. Apparently, we spend over $275,000 pre job – and none of those employees got paid that well. In 2010, President Obama’s second year in office, Democrats in Congress forced through an unpopular health care bill, which was wrought with budget gimmicks and will ultimately cost our country trillions of dollars. The President’s attempt at health care reform was so unsuccessful that the largest problem facing our debt and deficit situation is what we will do to contain health care costs. Another trillion dollars borrowed. Another trillion dollars wasted.
The American people were fed up with Congressional Democrat’s reckless spending spree, and in November 2010, they voted for real change. Those votes ushered in a new attitude, and seven months into a Republican controlled House of Representatives, the debate is entirely different. Instead of looking at where we can spend more money, we are looking at what we can cut. Instead of looking at how to borrow more money, we are looking at how we can change our spending habits so that we have a spending plan that is sustainable in the future. Republicans have heard the people’s call for smaller government and less spending, and are committed to taking action.
Earlier this year, Republicans led efforts to cut spending in appropriations bills for the first time in years. Now, we need to find a solution to cut trillions of dollars of spending at the same time we allow the President to have some additional borrowing authority to pay for the purchases we’ve already made. The cuts Republicans have proposed are the largest cuts ever seen, but it still isn’t enough to fix the problem long term.
Why aren’t we looking at a long term solution to this problem? Why are we forced to look at short-term, piddly spending cuts at the same time we give the President the ability to borrow lots more money? This isn’t one person or one party’s fault.
The President has us in a box. During his State of the Union message, the President could have explained to the American people the dire situation we are facing. The Deficit Commission had already painted the picture. The President needed to premiere that picture. He could have explained that we are borrowing more than 40 cents on every dollar we spend – much of it from China. He could have explained that we are on a spending spree that must be stopped. That was and is the true state of the Union.
After the State of the Union, he could have sent us a serious budget proposal modeled after his own Deficit Commission. Instead, he used his State of the Union to talk about more spending and his budget was such a ridiculous proposal it didn’t receive a single vote – Republican or Democratic – when it was put before the Senate.
While the President has failed to lead and deserves a substantial portion of the blame, we in Congress have also put ourselves in this box. During the last Administration, we should have worked to contain spending. While we missed that opportunity, when it was clear that we needed to make a major change this year, Democrats in the Senate should have ignored the President’s lack of leadership and put forward a budget proposal in the Senate. The House passed a budget, but rather than taking their proposal seriously, my Democratic colleagues demonized the plan as the end of Medicare. They preferred finding a campaign issue as opposed to actually solving the financial problems we face.
Unfortunately, we are quickly running out of options. We are at a catch 22. The country can't afford more debt, but has to have it. If we don't raise the debt ceiling, we won't be able to pay all of our bills and interest rates will go up. On the other hand, if we pass a plan that doesn’t fundamentally change the way we do business in Washington, we increase the debt limit with no end in sight and interest rates go up.
The Majority in the Senate that brought you banking reform has run up a huge debt and we’ve all maxed out the nation’s credit cards. Now they want to increase the amount of the mortgage. Imagine trying to get a loan when nothing has been paid on the principle of the previous loan. Now imagine the lender’s reaction when he is told that the mortgagee will be back shortly for another loan.
Let me put this in concrete terms because it might be easier to understand. Imagine that you have a loan on a very large house with a mortgage of $1.4 million. Since buying the house, you have made interest payments, but no payment on the principle. You determine you need more money to spend, so you have to go to the lender and request an additional loan of $230,000. At the same time you do that, you warn the lender that you will be back each year for the next 9 years asking for $100,000 more each year. You also let the lender know that you don't want to have to pay off any of the principle on the loan, just make interest payments each year.
I don’t think any lender would take you seriously, but if he or she did, they would explain that you would have to obtain a variable rate loan. A variable rate loan means that changes in the risk or the economy could drive interest rates much higher and there would be no protection from those higher interest rates. In other words, your loan with an excellent interest rate of 2.5 percent could go to an interest rate of 5 percent or 10 percent, or like under President Carter, over 18 percent a year! A 1 percent increase in interest rates for the U.S. debt would cost another $1.3 trillion over ten years!
The lender would point out that the raise in debt plus the rise in interest rates could result in your entire paycheck going to interest - and the interest payments would have to come ahead of food, clothing, and any social needs - for you, or for your children or your parents or your grandparents.
If the banker were foolish enough to consider such a loan, he would want to know what spending changes you were going to make. He would expect changes immediately, not piddly changes this year for a promise of a big change in the ninth year. He would want some proof that you are serious.
If we act now and agree to cut 1 percent – the 1 percent solution, just 1 penny of each dollar – from all our spending and reduce the cap to the new spending by that level for each of the next 7 years, the lender "might" consider your loan. There is a good chance he would expect 2 percent or 3 percent in cuts for the first year to demonstrate that you are serious about kicking your spending habit.
We are in that situation today in Congress. The President is asking for a $2.4 trillion loan – the largest loan in our nation’s history. Our lenders will explain to us, if we are worried about the low income, the downtrodden, and the less fortunate today, we should see what will happen to those individuals if we don’t cut spending. If we reach a situation where all of our revenues are going to interest payments on the debt, the future prioritization to pay for our debt will be unbearable. We can’t go out 18 months. The American people don’t trust us. We need to be accountable to the people. We need an enforceable, accountable plan with quicker results.
Some might argue that the lender would just expect you to bring in more money. My Democratic colleagues suggest just that when they say we must raise taxes. But everyone knows that if you ask your boss for a raise because you can't control your spending, you could be fired or demoted and, as a result, you would be bringing in less revenue. I don't need to tell you that our bosses – the American people - don't think much of how we have been working for them, and they don’t expect a tax increase each time Washington get addicted to giving away money.
The plan the Majority Leader has offered uses budget gimmicks to avoid real spending cuts and gives the President a debt limit increase that, while politically expedient, fails to put our country on a workable path. It doesn’t provide a way to assure any substantial cuts will be made. While it maybe makes some necessary spending cuts today, it does not provide us with relief from our long term challenges and does not put us in a situation where we would be forced to make the tough choices.
We know that the Majority Leader’s proposal won’t pass. Every Republican has made clear that they will oppose the proposal and so it doesn’t have the chance to move forward. We have made clear that we will not give the President the single largest debt ceiling increase in history for double the average time generally allowed since 1940 through the proposal the Majority Leader has offered. We have offered to vote on his proposal time and time again, and for reasons beyond comprehension, he refuses to allow a vote. I know that’s delay to bring the pressure of the “last minute” but that isn’t how reasonable government works.
I wish we had taken action earlier to avoid the situation we find ourselves in today. I wish the proposal before us was a serious effort to make structural changes to how we spend money. Instead, we all know the plan put forward by the Majority Leader will be voted down later tonight, or tomorrow, and we will be in the same place where we are right now – in the box where we need to raise the debt limit but we also need to make structural changes to get our fiscal house in order to keep the markets from melting down. We do recognize that we are about to enter territory where our country has never been. The stock markets are already reacting.
Because we are debating short term solutions, this debate will continue on even after we act on the debt ceiling. I hope we can come together with a debt ceiling increase and a plan for real spending cuts with enforcement. I hope the debt ceiling is limited to the amount of guaranteed cuts. I hope we can put our country back on a sustainable fiscal path.