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Public Statements

Default Prevention Act of 2013--Motion to Proceed

Floor Speech

Location: Washington, DC


Mr. MERKLEY. Mr. President, I am pleased to be here with my colleagues from Montana and Alaska to talk about some of the impacts in our various States. I thought I would share six or seven different aspects of the impact of a government shutdown and the potential of a default and then turn this over to my colleague from Montana. Then I think we are going to engage in a little bit of back-and-forth.

Before I list specific examples of the challenges that are faced, I thought I would give a framework or an analogy of how to think about this.

The legislative process is very much like a baseball game where various folks come together. There are some for bills, some are against a bill, they have a competition, and ultimately one side wins. Normally, the side that loses, if they believe they are still right, will say we will be back again later in the session, next year, just like a baseball team, to compete again or we will be back next year with an improved team.

But in this case, after the team that supported health care won, the team that lost said we are going to appeal the ruling to the umpire and we are going to ask the umpire to rule the game out of order and rule that the losing team actually won. Then, if the umpire doesn't come to our rescue, we are going to hold the crowd hostage and we are going to threaten to burn down the stadium.

Those are the types of actions that are outside the sphere of the normal legislative process--and they should be--because we have to be able to have a dialog in a democracy where we consider a bill and decide yes or no and then implement it and then come back and have an argument over improvements to that framework or whether we should throw it out completely. The American people have the opportunity to weigh in and say: Keep those folks. They did good legislation or throw the bums out.

But all that is broken if, instead of completing that cycle, we have the losing team say we are going to hold the crowd hostage and threaten to burn down the stadium. Then democracy doesn't function. That is where we are right now. Holding the crowd hostage is the government shutdown, and threatening to burn down the stadium is the threat to default on the payment of bills due.

So let's look at how the government shutdown is reverberating in some unexpected ways. Let's take home mortgages. A great majority of home mortgages across the Nation are insured by Fannie and Freddie. That insurance doesn't happen while Fannie and Freddie are shut down.

Let's take work necessary to improve our ports, where that work is on jetties. Now that work has to stop because we can't incur a new liability to the contractor to haul the rock out and put it into place or maybe it is on a dredger that needs to take place during a window between different salmon runs in the Columbia River. But now that gets delayed and who knows when it will get done.

Let's talk about a company in Oregon that exports, and they need for those exports an export license, but they can't get the export license because Commerce is shut down and can't issue that license.

They have inventory that is waiting to ship out. Then they have cashflow problems not only because they can't ship the inventory, they can't get the payments for shipping.

Let's talk about the trickledown for folks who are unemployed. You may think about it as an employee who is staying home. One employee wrote to me and said, think about this, think about the fact that I owe child support that is not going to get paid because I am not getting paid. Then he said, think about the housing market. I am not going to be able to pay my mortgage. What impact is that going to have on the U.S. economy?

Let's take a look at the backlog of veterans' benefits. All over my State I have veterans who are applying for benefits and they want an answer, and the Veterans Department is trying to process those applications. They have a high, intense effort to catch up on that backlog. Suddenly the backlog is getting bigger instead of getting smaller because the work that was being done to get rid of that backlog grinds to a halt and therefore individual veterans are disadvantaged by not having their applications processed.

Let's think about Head Start. Jessica wrote to me.

I work in early headstart in Grants Pass. We are facing a shutdown due to the government shutdown. We have children who need stability and a caring place where they can get their basic needs met. So many families struggle to feed their children and sometimes the food we serve is all those children get for the day.

Then she says:

We provide more than just what some consider day care. We teach, we nurture, we give hope to the next generation. Shutting down our centers would mean a higher rate of poverty and dangerous homes for families and children. We need our voices to be heard. We need someone to stand up for us.

There are so many different ways in addition that this shutdown is reverberating in Oregon. One that affects every rural community is the impact on timber planting. We have had the shutdown going on of actual logging that is taking place in Federal forests. Folks who are logging are being told to stop cutting new trees, to pull their logs, skid them out, if you will, haul them out and shut down.

What about the planning for the cuts for next year? What about the supply of logs to the sawmills that is going to keep that sawmill operating through the winter and into the spring? The reverberations are substantial. What about the economy in those small towns that depends on those log mills when folks don't have the money, because they can't log, to buy food at the grocery store?

I know the issues are not unique to Oregon. I am sure many of them reverberate in Alaska and Montana.

With that, I yield the floor for my colleague from Montana.


Mr. MERKLEY. I thank my colleague from Alaska. He is correct in pointing out that essentially right now we have a shutdown tax being imposed on families and businesses across our country. Indeed, we are facing just a few days from now a default tax. A lot of folks from across the aisle come here and say they took a pledge to block any form of tax. But this is the worst kind of tax of all.

Mr. BEGICH. They do not get any recovery.

Mr. MERKLEY. There is absolutely no value, no revenue raised that can be applied to the important aspects of running a government or reducing our deficit. Indeed, this is a burden on American businesses and American families that has no benefit in any other way.

In fact, the Senator mentioned the ripple effect. That ripple effect means what damages a family--I gave the example of a simple situation when an employee does not get their wages. They cannot pay their child support and they cannot pay their mortgage--and then what goes on from there.

Let's take, for example, the cut in food stamps. If food stamps are not issued, then it is not just the family who is directly hurt--and I might mention our most vulnerable families--but it is also the grocery stores that are hurt. They may have to lay off additional employees, additional ripples. This is a huge infliction of a burden.

If we want to think of a few examples of what happens with the default, we can think of many. Let's picture the default tax. By threatening not to pay our bills, that reduces confidence in Treasury bills, so therefore the interest rates go up on those Treasury bills. The interest rates therefore on mortgages go up and the interest on home loans go up.

Mr. BEGICH. If I can interrupt, car loans, credit cards, student loans, any type of credit you want to get to grow your business, expand your educational opportunities--maybe you are doing holiday shopping this year--all that is impacted in a negative way.

Mr. MERKLEY. Indeed, maybe you were planning to take out a home equity loan to repair your roof or make improvements to your house. You are going to pay a higher price. This is a default tax on all of America that does nothing productive at all.

This infliction of pain and agony on our businesses and our families is something that has not apparently resonated for some of my colleagues who want to threaten a default. Some of them have come to this floor and said: We think there is enough revenue coming in that we can pay our T-bills--our Treasury bills--and we can default on other obligations and therefore there won't be much damage.

We had a group of experts come in and testify before the banking committee. They said: Look, envision a situation where you are applying for a mortgage and you tell the bank that you have always made your house payments, but you were not able to make some of your other payments, such as your student or car loan. The bank is going to charge you more for your house payment because there are bills you have been defaulting on.

The same situation applies in America. If we pay our Treasury bills but we don't pay other obligations, that in itself will lower our credit rating and increase interest rates. A default is a default. You can choose whom you are going to default on, but no matter whom you default on, there will be a default tax on American families and American businesses with great damage to this country. That is why President Reagan simply said: Do not mess with the good faith and credit of the United States of America.


Mr. MERKLEY. I think the children across the country know that responsible individuals pay their bills and responsible governments pay their bills. I am sure this concept is common sense in the great State of Montana.


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