With Standard & Poor's announcement last night that it has downgraded the United States' credit rating, what we all hoped to avoid has happened. As I feared, the plan passed last week did not go far enough and, for the first time in history, the full faith and credit of the United States has been called into question.
The downgrade from AAA to AA+ could mean several things. For example:
* Interest rates on government debt could increase, bringing additional cost to taxpayers and worsening the long term budget picture;
* States, private companies, and entities like Fannie Mae and Freddie Mac could have similar downgrades, increasing their cost of doing business and raising credit card fees and mortgage rates for consumers;
* Foreign investment in the United States could slow;
* More uncertainty in the stock market could increase volatility as confidence becomes shakier; and
* The international view of America could be diminished.
I am increasingly concerned with the economic ramifications. Creating jobs and reigniting America's economy must be our primary focus. To do that, we need investor and market confidence.
China, Russia, and the European Union are trade partners but they are also competitors. A downgrade emboldens them. If they feel they are no longer dealing with the strong and stable America which has dominated the world economy since World War II, there could be a shift in the pecking order. This should concern all Americans.
The good news is that a lot can be done about the situation in which we find ourselves. S&P's announcement could serve as a shot across the bow, helping us to tackle that for which there has been insufficient political will. This could be the catalyst to get tough on ourselves and really address the problem.
There are several things we can and should do today:
1. Rather than arguing about the report, the White House, Speaker Boehner, and Senate Leader Reid should immediately start work on a new budget agreement. I believe discussions should be centered on the Cut, Cap, and Balance approach as passed by the House with bipartisan support.
2. Speaker Boehner and Leader Reid should immediately appoint the 12 member "super committee" provided for in the Budget Control Act. The members should be charged with reporting their recommendations by September 1 as opposed to November 23 as called for in the law.
3. The Senate must act on appropriations for the next fiscal year. While the House has passed a budget and eight of the twelve necessary appropriations bills, the Senate has failed to pass a budget and has passed only one appropriations bill. This means we risk a government shutdown on October 1 which causes more uncertainty. To avoid this, the Senate should immediately reconvene and start work to finish the process before the end of the fiscal year.
Additional items which need immediate action include:
1. Passage of a balanced budget amendment to the U.S. Constitution. Italy has agreed to take one up and, while the United States should not take its lead from Europe, we should show a more aggressive commitment to balancing our budget.
2. Passage of my proposal to bring total federal spending in line with historical revenues. just like small businesses and working families do every day, the government must live within its means. By limiting spending as a percentage of the economy, we can begin cutting spending now and achieve a balanced budget in five years.
3. Reforms the tax code to make it simpler and fairer for working Americans. In 2011, Americans will spend $391 billion just to comply with the tax code. What if we put that money to work in this economy? A Harvard economist estimates tax reform would boost the economy by $5 trillion!
4. Repeal the $150 billion in advance funding for ObamaCare. Earlier this year, I introduced a bill with Reps. Michele Bachmann and Louie Gohmert to accomplish the task.
If the benchmark for righting the fiscal ship is $4 trillion as called for by the ratings agencies, Congress should return to Washington and not leave town until such a plan is agreed upon. In everything we do, we must ensure that it is just the start of more to come.
As I have said before, it is clear America has a long struggle ahead as we continue to rein in spending and get our fiscal house in order. I intend to continue the fight and work for the reforms and spending cuts we need so badly in America.