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Ms. WARREN. Mr. President, the U.S. Treasury says that in exactly 8 days it will not have enough money to pay the government's bills. We are not in this position because the Secretary of the Treasury or the President spent more than they were supposed to. The Constitution allows them to spend only what Congress tells them to spend, and that is exactly what they have done.
We are not in this position because investors refused to buy our bonds. Investors are lining up around the block to buy those. We are in this position for one reason and one reason only: Congress told the government to spend more money than we have. Congress told the Treasury to run up our debt to pay for it, but now Congress is threatening to run out on the bill.
If that strikes you as bizarre, you are not alone. The United States is the only democracy in the world where the legislature debates whether it should pay the bills it has already incurred. The United States is the only democracy that regularly considers whether to run out on its bills; that is, to voluntarily default on its debt.
Congress exercises direct control over the amount the Federal Government spends and the amount the Federal Government brings in through taxes and fees. Our national debt is simply a function of those two things--the money coming in and the money going out--and so Congress exercises direct control over the amount of debt we have. If Congress is unhappy with the size of the debt, it should change how much it spends or how much it brings in. There is no other option. The idea that we can somehow renege on our debts without paying a huge price is a fantasy, a dangerous fantasy.
Consider what happened in 2011, the last time the government came up to the edge of a voluntary default. Even the possibility that the government would not make good on its debts spooked investors and pushed up interest rates. According to the Bipartisan Policy Center, the interest rate increase from the last time the United States even talked about default will cost the government $19 billion over 10 years. That is $19 billion that could have brought back funding for Head Start, Meals On Wheels or our military. That is $19 billion that could have eased the interest rates on student loans or been invested in medical research. That is $19 billion that could have been used to pay down the debt. Instead, that is $19 billion that was just flushed down the drain. Does anyone here care about wasteful government? Well, then, that is it.
The last time the government came to the edge of a voluntary default, consumers and businesses got spooked too. The S&P dropped by more than 17 percent, $800 billion in retirement assets vanished, mortgage rates went up nearly three-quarters of a point, costing every new homeowner real money. The net result was less consumer spending, fewer business investments, lower home ownership rates, and slower job growth.
That is what happened the last time Congress came to the edge of a voluntary default. What happens if Congress actually defaults? If that happens, there is widespread concern among economists of every political persuasion that we would plunge into another recession.
Government debt may seem to be an abstract and complicated thing, but, in fact, it is pretty simple. The government owes money to two main groups of people. It owes payments on U.S. bonds, which are mostly owned by foreign governments, and it owes money to the American people for things such as Social Security payments and Medicare reimbursements for hospitals and physicians. It owes paychecks to the military and retirement checks to veterans.
If the Treasury does not have enough money to make all of its payments, then it will likely try to minimize the damage to America's credit rating, and that means making payments on the bonds held by foreign investors, leaving others to absorb the losses.
Who will not get paid? Will it be seniors who rely on Social Security to live? Will it be hospitals that rely on Medicare to operate? Will it be our servicemembers who rely on paychecks to help their families back home? Will it be Federal contractors, large and small, who support millions of jobs nationwide?
The Treasury makes 80 million payments a month and many of them will be delayed. As more time passes, unpaid bills will pile up. From there, it just gets worse. The Federal Government's inability to pay its bills could set off a chain reaction of defaults, sending the financial system into turmoil. Millions of people who rely on Federal payments might not have the money they need to keep current on their student loans or their mortgages or their small business loans. That could cause interest rates to spike, leading to a wave of further defaults, while the financial markets would be faced with the very real possibility that the United States would not have enough money to make payments on its bonds.
American Treasury bonds are considered safe investments. They are considered so safe that they are used as collateral in millions of financial transactions around the world. If the United States does not have enough money to pay its bills, parties to these transactions will demand more collateral or different forms of collateral. That has a domino effect throughout the economy. The end result could be the kind of freeze of the credit markets that we saw after the failure of Lehman Brothers collapsed in 2008, the freeze that triggered the financial crisis.
The idea that we can renege on our debts and not pay a huge price is a dangerous fantasy. I have heard some extremists in Congress argue that even if the United States runs out of money to pay all its bills, it will not be so bad because the Treasury will be able to keep current on its bond payments and avoid a technical default.
That is a heck of a best case scenario, making bond payments to foreign governments, mostly China and Japan, while holding up Social Security payments, hospital payments, and military payments here at home. It is a terrible idea. People count on those payments to live.
It is also a terrible idea that would not work. Just ask top Wall Street executives, including the CEO of Goldman Sachs who said publicly and unequivocally that prioritizing bond payments would still create ``insurmountable uncertainty for investors,'' causing a spike in interest rates that would immediately increase monthly payments on student loans, mortgages, other personal debt, and would cripple job growth. Like it or not, the threat of default will cause this country a lot of pain.
I want to make this absolutely clear: If we run out of money to pay our bills, the world will view this as the first default in the history of the United States. Wall Street and the global financial markets will view this as the first default in the history of the United States.
This fight is about financial responsibility. Financially responsible people don't charge thousands of dollars on their credit cards and then tear up the bill when it arrives. Financially responsible Nations don't do that either. When we put our name on the line saying that a debt is backed up by the full faith and credit of the United States, we follow through. We protect our good name. We protect our good credit.
For many things that we do in Congress, we can make a mistake and then back up and fix it. A default on our national debt is not one of those things. If we default and pay late, the damage could be irreversible.
The first time we flirted with default was the first time in history that America's credit rating fell. If we actually default, some economists estimate we will add $75 billion a year to the debt in additional interest payments. That is three-quarters of $1 trillion over the next 10 years. There are a lot of good things to do with that money. Flushing it down the drain is not one of them.
If we default on our debt, we could bring on a worldwide recession, a recession that would pummel hard-working middle-class people, people who lost their homes and jobs and retirement savings and who are barely getting back on their feet. Maybe we can escape a recession--maybe--but we are playing with the lives of every American, and it is not what the American people sent us to do. This is no time to act out dangerous fantasies.
We must raise the debt ceiling. We must raise it now. A bedrock financial principle of government is to tell the world that the United States always pays its debts in full and on time. That is who we are.
I thank the Chair, and I yield the floor.
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