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Mr. CASEY. I commend the words of our chairman, the senior Senator from Iowa, for his warnings about the impact of sequestration and the across-the-board indiscriminate cuts. We are grateful for that because we need to be thinking about what happens down the road when we have a budget agreement.
I want to start today with a brief comment on what happened earlier. At about noontime we had a vote, which is a procedural vote which I was hoping would go in a certain direction, but it didn't. It was a vote to move forward on the question of how we are going to avoid default. I don't think it is the last word on this issue for the next few days, but I was hoping that the Republicans would at least allow a debate on how we can avoid default. So far that hasn't happened, but we are confident that in the next couple of days we will resolve this.
But I do think it is important we lay a foundation for why we need to avoid default, because we have talked a lot about the consequences and the impact of a government shutdown--and that remains what might be called a clear and present danger to the middle class and to our economy--but we have to talk at the same time about the consequences of default because we are only days away from the deadline.
Maybe the best way to start is not with numbers but with part of a letter I received from a constituent this week. The letter was dated October 8, so my assumption is that most of what is contained in this letter are fears about and the impacts from the shutdown only. The sentiments expressed in this letter will only grow in significance and severity as we get closer to the deadline and closer to default. I am reading just in pertinent part. This particular constituent is from northeastern Pennsylvania, about an hour from where I live, but in the same basic region. She talked about her own circumstances and that of her husband and then she continued on:
Besides our personal difficulties due to the budget impasse, my elderly parents live with the worry of when and if they will receive their Social Security checks. At 85 and 83 they should not have this uncertainty. These should be their golden years. It breaks my heart to hear my mother say she can't sleep and has a stomachache from the worry about where our country is headed. Middle- and low-income families cannot afford another economic downturn. We are just barely recovering from the last one.
That is what she says about her parents. Now, again, it is my assumption the worry and the anxiety expressed in that paragraph are solely attributable to the government shutdown. Those worries and anxieties, and, frankly, real pain, the physical pain expressed in that paragraph about her mother, will only grow the closer we get to default, because we know the consequences of default are almost unimaginable--about the worst economic hit we could take as a country. So that is why we have to take every step necessary to avoid it.
But I think the words of a constituent from Pennsylvania speak in this case for the Nation. Why should people have a worry, even if that worry is unfounded? We know Social Security checks are going out now, thankfully, but they are slowed down substantially if there is a default. We know even in a shutdown, if you reach the age of 65, it is going to take you a while to get the checks you are entitled to because the process of validating your eligibility is held up. But why should there be uncertainty? Why should any mother or father or grandmother or grandfather have an anxiety and a worry that leads them to have a stomachache, in the case of this letter, or where they can't sleep because of the political agenda of one part of one political party in one House of Congress?
So that is where things are with people's feelings and their anxieties, and we have to be able to respond to that.
The default question itself is of great significance now. Maybe 10 days ago it wasn't, but I am afraid we are in a period now where just the talk of default, just getting close to default, will have an adverse impact on our economy. This did happen in 2011. That is irrefutable. All the data, all the facts, show just getting close to default has an adverse impact on the economy. By one estimate, a recent estimate, that was almost a $20 billion hit to the economy, if you measure it over 10 years. There are all kinds of other consequences that I won't dwell on right now.
There were two statements made by Secretary of the Treasury Jack Lew in his opening statement to the Finance Committee on Thursday morning that I think we should be reminded of. This was in reference to the question, what if you go over the line in default and you have to decide which bills to pay, which is the wrong way to go, but Secretary Lew posited these two questions.
How can the United States choose whether to send Social Security checks to seniors or pay benefits to our veterans?
That is question No. 1. Question No. 2.
How can the United States choose whether to provide children with food assistance or meet our obligations to Medicare providers?
These are the kinds of questions we are all going to have to answer if we--as some people apparently want us to do--go over the default line for the first time in American history. To say it is fiscal madness doesn't begin to describe it.
Secretary Lew also said something else which we should contemplate today. He said:
It is irresponsible and reckless to insist that we experience a forced default to learn how bad it is.
We have heard talk in this body and in the other body about maybe we can survive if we go over the line; that maybe it is okay, maybe we can prioritize payments. I think we should be reminded of those words. Again, that quote:
..... to insist that we experience a forced default to learn how bad it is.
It makes no sense and, fortunately, there is a consensus against it, but we still have work to do to prevent it from happening.
I will read as well a couple of lines from a letter I received from a friend of mine who has spent a lot more years in the financial markets and has spent a lot of years trying to get both parties in Washington to come together fiscally. I will read some lines from this memo he sent me. He was talking about what happens with default. It is like anything else--if you default on your mortgage, if you default in your personal life, you have a credit problem. He said:
From the standpoint of our creditworthiness, a default is a default. Once you have defaulted, you are a--
And I will leave the word out he put in there because it may not be appropriate for this Chamber, but I think people can figure out what the word might be here.--
And everyone fears they will be the next party not to be paid. As in the Lehman bankruptcy--
And here he is talking about the fall of 2008.
the potential for unintended consequences that spiral out of control is enormous. In short, toying with default is not akin to playing with fire but is more like handling financial weapons of mass destruction. It is a violation of the trust we place in our elected leaders to safeguard the welfare of our country.
That is what this person, who I know has a lot of experience in the markets, describes could happen in the event of default.
I will conclude with some quick references to the impact of default as described by economists, as described by experts in the field of measuring the impact of default, and folks who know a lot about what would happen. I will read them as quickly as I can, because we know some of these already but we have to remind ourselves: Increasing borrowing costs. Many have talked and written about that. Damaging economic growth. Higher interest rates. Higher debt payments. Slow economic growth.
One expert was talking about the Lehman bankruptcy and then putting that in the context of a default, and making the case that a default has a much bigger impact than even the Lehman bankruptcy had.
Consider this: In 2008, the Lehman bankruptcy was an ``event that triggered the financial crisis that caused the stock market to lose half its value over just 5 months and helped to trigger the worst recession since the Great Depression.''
That was just the Lehman bankruptcy. Imagine in the context of default how much worse it could be.
Retirement savings. According to newer data, an equivalent hit could cost--comparing it to what happened in 2011--the average person in his or her fifties, who has been saving for 20 or 30 years, as much as $11,000.
Mortgage payments would be hiked. After the 2011 shutdown, mortgage spreads jumped by 70 basis points, which would have added $100 per month to the cost of a typical mortgage.
So we have data from 2011 that measures the adverse impact on mortgages just by getting close to default, not in the event of default itself.
Disrupted payments. Delayed or disrupted payments would prevent 57 1/2 million Americans from receiving Social Security benefits in a timely manner and interfere with payments to 3.4 million veterans.
I will read two more. Moody's chief economist Mark Zandi, who has testified in front of the Senate many times--who, parenthetically, as relates to the shutdown testified yesterday over in the House, because the Joint Economic Committee is a joint committee--predicts that, just as it relates to the shutdown, in this fourth quarter, the fourth quarter we are in, we will have lost 1/2 point of growth. So instead of the GDP growth in the fourth quarter being 2 1/2 percent, as Mark Zandi would have projected absent a shutdown, with the shutdown we will go from 2 1/2 percent growth to 2 percent. That is a shutdown in one quarter. Just imagine the impact on growth if we default.
Here is what Mark Zandi says. I am quoting him directly:
It would be devastating to the economy. Confidence will evaporate, consumer confidence will sharply decline, businesses will stop hiring, consumers will stop spending, the stock market will fall significantly in value, borrowing costs for businesses and households will rise.
And he goes on from there. But, look, you don't have to be an economist to know the impact of default. All you have to do is read what economists are saying across the board. These are people who disagree on a lot of things. They might disagree on a budget item. They might disagree on econometric modeling. They might disagree on tax cuts. They might disagree on a usual Democrat versus Republican approach to the economy. They might have fundamental disagreements on everything, but on this they are speaking with one voice: Don't default, they are telling us. Don't even get close to defaulting. Don't even talk about or debate defaulting. Just prevent it from happening. That is the overwhelming consensus.
Let me conclude with one reference here. When I got to the Senate, one of the leading Republican voices on the budget--because he happened to be the ranking member on the Budget Committee--was Judd Gregg from New Hampshire. He had been a Governor of New Hampshire and then served in the Senate for many years. This is what he had to say recently in talking about what would happen in the event of default and brinkmanship with the debt limit.
[It] 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.
So says the former ranking member of the Budget Committee, the former Republican Senator from New Hampshire. So the idea that some think for some reason we could go into default or even get close to it doesn't make a lot of sense.
I will conclude with this thought. That letter I started with from my constituent in Pennsylvania, who speaks for the country, I believe, when she was talking about her parents--her 82- or 83-year-old parents--and about the uncertainty they have, about the worry and the anxiety that is literally causing, in the case of her mother, according to this letter, physical pain,
but even if it didn't rise to that level, just the idea of a government shutdown coupled with the potential default is causing that kind of anxiety and is really disturbing, and I think it is an insult to so many Americans.
We have to come together and open the government at long last and make sure we pay our bills and not even get close to defaulting, and then we can have negotiations and discussions for weeks and months about long-term and short-term issues. In the meantime, we have to make sure we pay our bills and open the Federal Government.
Mr. President, I yield the floor, and I suggest the absence of a quorum.
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