Hearing Examining the Government’s Ability to Continue Operations When at the Statutory Debt Limit
SUBCOMMITTEE ON OVERSIGHT
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
April 10, 2013
Printed for the use of the Committee on Ways and Means
COMMITTEE ON WAYS AND MEANS
SAM JOHNSON, Texas
|SANDER M. LEVIN, Michigan
CHARLES B. RANGEL, New York
JIM MCDERMOTT, Washington
JOHN LEWIS, Georgia
RICHARD E. NEAL, Massachusetts
XAVIER BECERRA, California
LLOYD DOGGETT, Texas
MIKE THOMPSON, California
JOHN B. LARSON, Connecticut
EARL BLUMENAUER, Oregon
RON KIND, Wisconsin
BILL PASCRELL, JR., New Jersey
JOSEPH CROWLEY, New York
ALLYSON SCHWARTZ, Pennsylvania
DANNY DAVIS, Illinois
LINDA SÁNCHEZ, California
JENNIFER M. SAFAVIAN, Staff Director and General Counsel
SUBCOMMITTEE ON HUMAN RESOURCES
DIANE BLACK, Tennessee
|JOHN LEWIS, Georgia
JOSEPH CROWLEY, New York
DANNY DAVIS, Illinois
LINDA SÁNCHEZ, California
The Honorable Michele Bachmann (MN-6)
The Honorable Tom McClintock (CA-4)
The Honorable Steve Scalise (LA-1)
The Honorable David Schweikert (AZ-6)
The Honorable Daniel Webster (FL-10)
Hearing Examining the Government’s Ability to Continue Operations When at the Statutory Debt Limit
U.S. House of Representatives,
Committee on Ways and Means,
The subcommittee met, pursuant to notice, at 10:08 a.m., in Room 1100, Longworth House Office Building, Hon. Charles Boustany [chairman of the subcommittee] presiding.
[The advisory of the hearing follows:]
*Chairman Boustany. This hearing will come to order. The Committee on Ways and Means has jurisdiction over the Federal Government borrowing, as well as the Treasury Department’s debt management practices and the debt limit. The Founders vested the power to borrow money exclusively in the legislative branch.
Since the Founders’ time, Congress has repeatedly exercised that power by authorizing the executive branch to borrow funds on the country’s credit, subject to limitations on the amount borrowed. Without this delegated authority, the executive has no authority to borrow money on its own. Under the No Budget No Pay Act, which moved the Senate to pass its first budget in five years, the statutory debt limit of $16.4 trillion will be amended after May 18th to reflect the additional borrowing since February 4th.
The Federal Government will then resort to what are called “extraordinary measures” to pay obligations. But extraordinary measures only work for so long. If extraordinary measures are exhausted ‑‑ a scenario that the President and Congress must work together to avoid ‑‑ Treasury will not be able to pay all obligations on time. This is because the government currently brings in just $.60 for every dollar it spends. If the government comes to the limit and lacks other options, Treasury would have access only to daily revenue, which can vary significantly from day to day to meet obligations as presented for payment.
This morning the Subcommittee on Oversight will hear Member views on how the government would operate under these circumstances. We have with us today five Members of Congress who have proposed legislation related to this issue, and I want to thank them all for taking time to join us, and for the work that they’ve done.
In 2011, some media outlets reported that the Obama Administration was planning to announce a strategy to prioritize certain payments over others, if faced with this kind of scenario. However, absent congressional instruction, it is not clear how or whether Treasury would or even could prioritize payments. To provide instruction, Members of Congress meanwhile have introduced legislation that will direct Treasury in its prioritization of payments.
While disagreements between the executive and legislative branches over matters of borrowing and spending are as old as the Republic itself, the government has never failed to pay what it owes. To be clear, it is the shared responsibility of Congress and the President to find a way to pay our bills full and on time. It is also our responsibility to put the country on a fiscal path that leads to a balanced budget and avoids bankrupting our children and grandchildren. And it is the responsibility of this Subcommittee to examine current law and consider how the government might operate in the event of a debt crisis.
Now I am pleased to yield to the distinguished Ranking Member from Georgia, Mr. Lewis, for an opening statement.
STATEMENT OF THE HON. JOHN LEWIS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF GEORGIA
*Mr. Lewis. Thank you, Mr. Chairman. Thank you for yielding. I want to thank you, Mr. Chairman, for holding this hearing. I am troubled that we are here today discussing this issue. This hearing implies that it would be appropriate to default on our debt, and that a default can be managed is simply is not true.
It would never be appropriate for the United States Government to default on the debt. The debt ceiling is about paying the bills of the United States of America, spending that has already been authorized by the Congress. Our presence here sends a dangerous signal to the markets and the world that there is a possibility that we may default on some or all of our debt.
We have been down this road before. In the summer of 2011, Republicans in Congress pushed our nation toward default, and there were clear consequences. The market tumbled and the Dow Jones plummeted 2,000 points in July and August of that year. Our country’s credit rating was downgraded for the first time in our history. Shortly after the downgrade, one senior director of a credit rating agency said that our government’s stability was undermined by the fact that people in the political arena were even talking about a potential default.
Yet, despite this history, we are here again today. At this point, all I can say to House Republicans and to the witnesses is, “Be careful.” As my mother would say, “Be careful, be particular.” The debt ceiling should not be used as leverage. The Treasury Department has made it clear that there is no fair way to pick out and choose which bills should be paid, and its systems are designed to pay bills in the order received.
I ask my colleagues, “whose bills should not be paid?” The Social Security checks of 56 million seniors and people with disabilities, the salaries of more than 2 million American military personnel, many of whom are currently in harm’s way, hundreds of thousand of American businesses that supply goods and service to and for the government and expect to be paid? Who else?
The United States of America must pay all of its obligations as they become due. There are no other legal options. This is the American way. We are the United States of America, and we pay our bills, Mr. Chairman. Thank you, and I yield back.
*Chairman Boustany. Thank you, Mr. Lewis.
We will now receive testimony from our witnesses. We have a very distinguished panel today, which includes the Honorable Michele Bachmann of Minnesota; the Honorable Tom McClintock of California; the Honorable Steve Scalise of Louisiana; the Honorable Dave Schweikert of Arizona; and the Honorable Daniel Webster of Florida.
I would like to remind the witnesses ‑‑ I am sure you are already aware ‑‑ that you may submit a statement for the record in addition to your oral remarks and any other extraneous materials. It is not required. And you will each be recognized for five minutes to give your oral testimony.
We will start with you, Mrs. Bachmann. You are recognized for five minutes.
STATEMENT OF THE HON. MICHELE BACHMANN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MINNESOTA
*Mrs. Bachmann. Thank you, Chairman Boustany, and also Ranking Member Lewis. I thank you for taking up this important issue. It is extremely important that we deal with this issue. And I take your remarks very seriously.
I would just like to go to the remarks that were made by the Ranking Member regarding the downgrading of our debt [sic] in August of 2011. That was a bellwether for our nation. I agree with you on that. We can never allow anything like that to happen again.
But as we all recall, at that time the story and the reason why we saw that downgrade is because the agencies saw that here in Washington we were doing nothing to stop the out‑of‑control spending. It wasn’t the fact that we were talking about the issue; it was the fact that we weren’t doing anything about it. That is why we are here today. That is why I am so proud to be a cosponsor of Mr. McClintock’s legislation, because we need to send an unmistakable message to the markets across the world that the United States of America will now and will always stand by the full faith and credit of the United States. And in order to do that, we need to prioritize our spending and make sure that the markets and the world know that the United States will always pay our bills. And that is why we can always enjoy the highest credit rating. And that is why I support this legislation. So I thank you.
You see, debt is the problem facing the United States of America today. It isn’t just a Washington issue. It is an issue with repercussions for all Americans. And we have this unique responsibility, as Members, to be good stewards of tax dollars. And I want to emphasize these dollars don’t belong to the government, they belong to all of the people that we represent. Because the only money that government has and spends comes from the fruit of the labor of hard‑working Americans.
In March of 2006 a Senator spoke on the Senate floor about the debt ceiling. He said ‑‑ and I quote ‑‑ “The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we can now depend on ongoing financial assistance from foreign countries to finance our government’s reckless fiscal policies.”
Mr. Chairman, I couldn’t agree more with that Senator. That Senator is now our President, Barack Obama. And ‑‑ because the power of the purse lies within our body and because our congress has granted the President limited borrowing authority, it is still our constitutional responsibility to oversee the finances of our country. There shouldn’t be any doubt of the importance of maintaining the full faith and credit of the United States. That is why it is wise that we are here today. It is wise that we have Mr. McClintock’s legislation to responsibly ensure that our country will not now nor ever default on our obligations.
And so, as we are working together to reduce spending, we have to address this current debt that we owe. And there is powerful reasons as to why the debt ceiling won’t be automatically raised. We must maintain that the government doesn’t automatically have the ability to continue to raise the debt ceiling. It is our responsibility as Members to review our fiscal situation and make the adjustments that we need to, because this could result in the debt ceiling not being raised. And if that happens, then Treasury would have enough money to prioritize payment, as the Ranking Member said, of the government’s bills.
The Treasury does have the ability to pay the interest and the principal, and still have enough money to pay for the constitutional functions of government. Our former Treasury Secretary, Mr. Geithner, said he lacked the authority to prioritize paying the debt. That is why I am proud to be here today. Let’s do this to maintain the full faith and credit of the United States. We can today, here and now, remove the ambiguity and direct the Administration to prioritize spending on our bills.
I thank you for this opportunity, because our country is in a critical fiscal situation. When you borrow nearly half of what we currently spend, that cannot go on. And kicking the can down the road is not a good policy for growth, for stability, and for responsible government. I will be submitting my full statement to this Committee. I thank you for your work, I thank you for the responsibility that you are taking, and I yield back my time.
*Chairman Boustany. Thank you, Mrs. Bachmann.
Mr. McClintock, you are recognized for five minutes.
STATEMENT OF THE HON. TOM MCCLINTOCK, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
*Mr. McClintock. I thank you, Mr. Chairman and Members. I was heartened by the Ranking Member’s remarks, and I hope that means we can all agree that the full faith and credit of the United States should not hang in the balance every time there is a fiscal debate in Washington.
H.R. 807 will strengthen and protect our nation’s credit by assuring the debt service has first call on all incoming revenues. Even with record deficits, our revenues are roughly 10 times greater than the service on our public debt. So there is absolutely no excuse for a debt default. And this is not a radical suggestion; the Government Accountability Office has consistently held that the Treasury Secretary already has “the authority to choose the order in which to pay obligations of the United States” to protect the nation’s credit.
Indeed, such authority is inherent in the 1789 Act that established the Treasury Department and entrusted it with management of the revenue and support of the public credit. This measure simply restates that existing authority and requires the Treasury Secretary to use it to protect the nation’s credit.
Most states already have similar laws. Last year Fed Chairman Ben Bernanke credited these provisions for maintaining confidence in state and municipal markets in testimony he gave to the Senate, and he told the House Budget Committee that a similar measure at the federal level would help to protect against a default.
Now, is this tacit acceptance that the nation shouldn’t pay its other bills? Well, does anyone suggest that all of the states that have similar provisions in their constitutions and statutes for hundreds of years have ever used them as an excuse not to pay their other bills? Of course not. On the contrary, Mr. Chairman, this provision to support their credit first actually supports and maintains their ability to pay all of their other obligations in the event of a default.
Now, think about it this way. When you are depending on your credit cards to pay your bills, you better make sure that you make the minimum credit card payment first. That is what this bill does.
Some say we ought to include other priorities like Social Security or payments to our troops. But, of course, once we start down that road we run out of money before we run out of worthy programs. And Congress should not try to micromanage this process.
More importantly, the fact is that the public credit is what supports Social Security and payments to troops and all of the other obligations. And this legislation ought to be focused on this central and fundamental imperative, to protect the public credit. And beyond that, we should leave it to the Treasury Secretary to set priorities according to the demands of the times.
Now, opponents have said, well, this would put repaying China ahead of repaying ‑‑ or of paying Grandma’s Social Security. But more than half of the debt held by the public is held by Americans, including Grandma’s pension fund. China holds only 11 percent. And this bill protects American debt holders and assures that American pension funds won’t be undermined in the event of a temporary fiscal stalemate in Washington.
Again, this is not a prolonged ‑‑ or this is not an endorsement of a prolonged stalemate over the debt limit or funding bills. Postponing the prompt payment of all of the government’s bills would be unprecedented and dangerous. Although existing revenues could support critical government responsibilities for a while, distress to other federal employees and contractors would be severe, rapidly compounding, and eventually would threaten core governmental functions. It is something to be avoided at virtually all cost ‑‑ except, of course, the cost of imperiling the nation’s credit.
We should remember that if the full faith and credit of the United States is ever compromised, all programs are jeopardized. We must also recognize that today our country is divided over fiscal policy, and protracted disputes in Congress over this policy are likely to continue for some time. Financial markets ought to be confident that their treasury bonds are safe, regardless of what political storms may be raging in Washington.
*Chairman Boustany. Thank you, Mr. McClintock.
Mr. Scalise, you are recognized for five minutes.
STATEMENT OF THE HON. STEVE SCALISE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF LOUISIANA
*Mr. Scalise. Thank you, Chairman Boustany, Ranking Member Lewis, and the other members of the subcommittee, for having this hearing, as well as Chairman Camp for bringing this issue to the forefront.
And I want to first say I am proud to be a cosponsor of Congressman McClintock’s Full Faith and Credit Act. I think the fact that we have had these protracted negotiations in the past and ‑‑ and, unfortunately, when we get to a debate on the debt ceiling, sometimes it becomes clouded in extraneous issues. And unfortunately, we have seen the President use the threat of default to sidetrack us from having an honest discussion about why we are here in the first place.
The fact that we keep hitting up on the debt ceiling shows that the debt ceiling is a symptom of the bigger problem in Washington, and that is Washington spends too much money. When we approach the debt ceiling, we ought to be talking about how we solve the problem that prevents us from hitting the debt ceiling again. And that is the fact that we need to get control over Washington spending. And we shouldn’t have that conversation under the backdrop of a default threat.
What this bill does is removes default as an option. It takes that threat away. And then it forces a serious conversation about how we actually solve Washington’s spending problem. Because again, we don’t hit the debt ceiling unless Washington has a spending problem that gets us there in the first place.
And so, the way that this would work would be quite simple. And as Congressman McClintock pointed out, GAO and other agencies have already said that the Treasury Department has the authority to pay our debts, that default shouldn’t be an option. But the President has made it an option and made it a threat by saying that he may not exercise that right. And so I think by the fact that we would put into law that default is not an option, again, it gets us back to a real conversation on solving the underlying problem.
And we are going to be having that discussion again, you know, whether it is in May, June, or July, or by August, we are going to be hitting that debt ceiling again and extraordinary measures will expire. And so, as we figure out, as policy makers, how we stop this problem from happening again, that conversation shouldn’t be had under the backdrop of default.
If you look at what this bill would also do for our economy, this bill would help our economy dramatically, because not only would it stabilize markets. Our small business owners, our families that balance their own budgets, look to Washington and they see this as another area of uncertainty. People are tired of Washington living from crisis to crisis. One of the reasons that we continue to seem to have a crisis of the month is because when we get to a crisis, we don’t solve the underlying problems that continue to force us at that point.
If we actually take on this first and say prioritization is important to Congress ‑‑ but it also should be important to the President ‑‑ to make this a backstop when the President comes to us with another debt ceiling request ‑‑ you know, and I am sure he is going to come to us and say there shouldn’t be any reforms attached to it ‑‑ but let’s look at history. And as Senator Graham and others will tell you, attaching reforms to a debt ceiling is something that is not new. That has been going on for decades in this country.
And, frankly, the reforms to the debt ceiling have been some of the things that have actually solved those fiscal problems in the past. And we should learn from history’s failures and successes. Some of the successes in our history have been that when we approach the debt ceiling there have been good reforms attached to some of those approaches that stopped us from continuing to hit that problem over and over again.
We are seeing it all too frequently now, where we hit the debt ceiling not years apart, but in some cases now months apart. That should be a sign to us all that reforms are desperately needed. And it is very difficult to have an honest conversation about those reforms, if the threat of default is out there being exercised by our chief executive, by the President. The passage of the Full Faith and Credit Act will ensure that default is no longer a threat, and then it forces Congress and the President to have an honest discussion about how we can solve the big spending problem that continues to push us to the debt ceiling.
So, again, I thank the Chairman and the Members for having this hearing. Hopefully we can get legislation moved not only through the committee, but through the House and Senate, and then get to an honest discussion about how we solve the underlying spending problem. And I yield back.
*Chairman Boustany. Thank you, Mr. Scalise.
Mr. Schweikert, you are recognized for five minutes.
STATEMENT OF THE HON. DAVID SCHWEIKERT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ARIZONA
*Mr. Schweikert. Chairman Boustany, Ranking Member Lewis, and members of the committee, I actually appreciate this opportunity.
One of the primary reasons I introduced my version is my absolute frustration with the disingenuous language that has been used over the last two years. The language is saying, “We are heading to default.” It is absolutely disingenuous. If you believe the government is intending not to pay its bond debt and its refinancing obligations, that is something very different than not paying other bills and obligations.
But yet how many times did we hear Secretary Geithner and the Administration the last couple years use the term, “Well, the United States is going to do a default.” And then, when he was called on the carpet for that, the language became “technical default,” which has some ethereal definition of not paying a bill that is ‑‑ comes from the Park Service, or something else. The use of the language “default” in the markets is not paying our bond obligation.
And if we want to actually look at what happened in summer of 2011, it is not the equity markets you want to track. It is actually the interest rate markets. And the interest rate markets made it perfectly clear the thing they were interested in is how do they get paid back. If you are going to issue trillions of dollars of debt into the future, the question is: How do I get my money back? It is not the equity markets. And that is actually another disingenuous part of the argument out there.
So, why did the United States get downgraded after the August 2011 fight over the debt ceiling? It is because we did not offer ‑‑ and this is ‑‑ go back and read the Moody’s and the S&P and the debt market letters and analysts from the credit rating agencies ‑‑ it is because we did not provide a credible method for the future on how we were going to pay those obligations back.
So, once again, how often does the arguments, the discussion, the use of language about the debt ceiling become political, and not honest about finances and math? As my running joke back in Arizona is, “I have come to Congress and I have grown to believe that it is not Republicans and Democrats, Conservatives and Liberals, it is those that own calculators and those that don’t.”
So, the reason I introduced H.R. 1231 is ‑‑ and I should make it perfectly clear. I actually ‑‑ if I had a preference, I would vote for the gentleman from California’s bill, but we had Secretary Geithner for much of that early part of 2011 tell us he did not have the authority to prioritize. And then, as we hit July 2011, the articles started coming out that he did have the authority and was actually working on a plan. Yet he would not share that plan with Congress, and therefore, would not share that plan with those very debt markets we are talking about in trying to maintain the stability of our interest rate futures.
My legislation says, “Okay, if I can’t get Congress to do its job and say, ‘Here is our prioritization, because we are supposed to be in the policy‑making business, maybe I can get the Administration to actually lay out, saying, ‘Here is the Administration’s priority,’ and this time not keep it as a secret to themselves.” Very simple. We want to provide that visibility of yes, we will cover our debt obligations. And then maybe we will step up and do our obligation of how we intend to pay all this debt back.
Mr. Chairman, I yield back. Thank you.
*Chairman Boustany. Thank you, Mr. Schweikert.
Mr. Webster, you are recognized for five minutes.
STATEMENT OF THE HON. DANIEL WEBSTER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA
*Mr. Webster. Thank you, Mr. Chairman and Ranking Member, members of the committee. It is a pleasure to be here to present to you this bill, House ‑‑ H.R. 149. This is not a substitute for failing to increase the debt ceiling. This is merely a short‑term back‑up. This bill removes the fear caused by the Administration’s rhetoric that we have ‑‑ so that we could have a rational discussion about increasing the debt limit and reducing spending.
Here is what the President said in 2011. “If Congress fails to increase the debt limit, the government will have to stop, limit, or delay payments in Social Security, Medicare benefits, military salaries, interest on the national debt.” To me, those ought to be the priorities, and I am going to give you a reason why.
But, first of all, I want to say there has not been a budget offered in this congress that has been voted on on the floor, whether it be in the Senate or the House ‑‑ it won’t be in the President’s budget, either ‑‑ that does not require borrowing money. None. No matter how conservative or how liberal. It still requires borrowing money. So this does not negate the fact that we are going to have to borrow money to fund whatever appropriations we come up with.
But what it does say is we could have a rational discussion about two issues. One is raising the debt limit, but the second is how can we cut spending and reduce spending along with that.
So, why these priorities? I believe there is an important part of this bill that says these are the priorities, far different from any other part of government we fund. Number one, our number one obligation, which has already been said several times, is to pay our debts. But number two, the most important function of government is to protect this country. And that is why the military salaries are included in this.
But then what about Medicare and Social Security? Understand this. And I know you do understand this. These two programs, above any other program that we do, not in any other way other than the fact the way they were created and the Act of Congress itself made these the two most important programs we have. No other program is funded out of a payroll deduction. None except these two.
Matter of fact, it is a regressive tax. It is taxed on every single person. If you are a part‑time worker, summer worker at minimum wage as a teenager, you are going to pay 7.65 percent of your salary to this program, and the employer is going to match that. If you are a ‑‑ have a full‑time job and make a decent salary, you too are going to pay the same exact percentage. It is not graduated, it is not graded. There are no credits, there is no offsets. You don’t get that money back. Could those low‑income earners get back the withholding tax that pays for the rest of the programs in government? Yes, they can. But can you get that money back? Absolutely not. Why? Because we have set this up as a most important part of our government.
So, those two, far above any of the others ‑‑ you could name lots of other programs, lots of them. But in the end, none of them are funded in this way. We, as a Congress, and congresses in the past have said, “This is a very, very important program, and we are going to fund it differently than any other thing. Matter of fact, we are going to tax every wage earner in order to pay for them.” So are these priorities? They absolutely are. And they should be established that.
I think it is interesting that the four things the President said might be something he would have to stop or limit would be these four: the national debt, paying that, paying our interest on that; paying our military; paying Social Security; paying Medicare. What this does, like I have said, is end the fear, so that we can have a rational discussion about what we ought to be doing in relation to debt limit and reducing spending.
I, not unlike the President and others, have voted for every debt limit increase. So it is not like I am coming here saying I am not going to vote for it. I am not saying that at all. And I have done it, and I have proved it. The President never proved it, and others have not, either. But I will. But what I do ‑‑ and I believe we ought to fund whatever appropriation we pass. If we are going to pass appropriation, we are going to take credit for the appropriation, then we ought to pay for what it takes to pass it.
But I think we also ought to have a discussion about shutting down spending and slowing the growth of spending. And the only way we can do that is to take away the fear that is going to be used by those in our Administration who have used it to put fear in the people and absolutely change the opportunity to have that discussion.
Thank you, Mr. Chairman, for letting me appear. I yield back.
*Chairman Boustany. Thank you, Mr. Webster. I want to thank all of you for your testimony. Some have clearly argued that Congress should abolish the debt limit to avoid a crisis. Others have even said that the President has the authority to actually ignore the debt limit and issue debt without regard to the debt limit statute.
And I would like each of you to comment on two points. Is the debt limit the problem, or are our deficits and the growing debt problem truly the problem? And does the borrowing authority belong to Congress, or does the President indeed have the inherent authority to borrow money?
So, if you could, answer those two questions for the record so we can get some clarity on that. Mrs. Bachmann, you want to start?
*Mrs. Bachmann. Thank you, Mr. Chair. I will tell you what I heard over the last two weeks over break. I talked to a lot of people in my district in Minnesota that are around the age of 30. And what they talked to me about was debt. They are all writing their checks right now to the IRS for the taxes that are due, and they are shocked. They were shocked. There were a lot of 30 year‑olds that were writing $10,000 checks for taxes, or $20,000 checks for taxes. And what they said to me is, “This just can’t go on.”
But what they are also seeing is that this is the beginning of a burgeoning tax burden that will be unlike anything that any prior generation of Americans have ever had to deal with. And they recognize that will yield then higher and higher tax burdens. So debt limit versus debt, I will tell you what the people that I represent say in Minnesota. It is debt. And they want us to attack that issue.
You also asked about borrowing. The other thing that they know is that they have voted for us to work for them, and they want us to make these decisions. So who has the authority, the President or Congress? We need to go back to our founding document, the Constitution. And the Constitution makes it very clear. It is the House of Representatives that initiates all taxing bills. Taxing and spending is what leads, ultimately, to debt. And I think inherently that speaks to us, that it is Congress that has that authority on raising the debt ceiling, not the President of the United States.
*Chairman Boustany. Thank you, Mrs. Bachmann. Mr. McClintock.
*Mr. McClintock. Thank you, Mr. Chairman. I would simply add there is nothing theoretical about the national debt. That is real money that has to be repaid by our children and grandchildren. Every trillion dollars we throw around here is an annual deficit in Washington, actually equates to about $9,000 from an average household in America that they will have to pay back through their future taxes, just as surely as if it appeared on their credit card statement this month. In fact, they have to pay that back before they pay back their credit card statement. And the IRS is always very insistent that they do.
We all know from our own experience if you live beyond your means today, of necessity you will have to live below your means in the future. That is the future that we are creating for our children and our grandchildren. That decision ought to be in the hands of the people, through their elected representatives. And, as Mrs. Bachmann has said, that is why Congress is entrusted with these purse strings.
Until we are able to balance our budget, we are going to have to increase the debt limit. There are plans that move us toward balancing the budget. But in the meantime ‑‑ we are going to have to do that. But that decision should not be taken lightly, and it ought to be taken by the representatives of the people.
*Chairman Boustany. Thank you. Mr. Scalise.
*Mr. Scalise. Mr. Chairman, to your first question, clearly, spending is the problem. Again, we wouldn’t be hitting the debt ceiling unless Congress and the President spent more money than we take in. So if you look at what we are taking in today, the Federal Government takes in about $2.5 trillion. It is not like we take in nothing. It is not like if the debt ceiling is not increased there wouldn’t still be money to spend. There is still about 2.5 trillion we take in.
The problem is we are spending about $3.5 trillion. At least we in the House passed a responsible budget that actually balances within the 10‑year window. We did it without raising taxes, we did it primarily by encouraging economic growth and some of the tax reforms that your committee is debating right now. Those are the things that actually get you to balance so that you are no longer having to come and borrow money; you are living within your means.
Families do this every day. Doesn’t mean they don’t have a credit card, doesn’t mean they don’t have debt. What it means is when a family builds into their house budget they add their home mortgage, they add their credit card payments into that, and then they still, whatever they are taking in, they live within their means. We need to get to a point where Washington is doing the same thing, where we have a balanced budget. Clearly, we are not there yet. But if we control the spending side, at least what this says is default is not going to be an option as we are having that discussion about how to get to living within our means.
But this resides in the Congress’s purview. And the debt ceiling is a level of accountability. You don’t want the President to have the exclusive ability to just go continue borrowing money whenever he chooses to run up more spending. There is a level of accountability that was placed into our laws and our Constitution that says the Congress has this check and balance so that ultimately we can keep an eye on the public trust.
*Chairman Boustany. Thank you. Mr. Schweikert.
*Mr. Schweikert. Mr. Chairman, committee members, to the point of your question, of course borrowing, you know, need for credit, is a function of budgeting. You know, it is ‑‑ there are two sides of the operational side of the ledger. So, first off, borrowing is absolutely in the purview of Congress, and particularly those of us here in the House. That is just the way life in the world is.
I would like to actually pitch the concept that if you believe the way it is that the need to borrow is a function of how we do our budgets, then the reality of it is the amount of debt, additional debt we are asking to put on the American people, should be attached to a budget document. If we come out of this year and say, “We need a half‑a‑trillion dollars of new borrowing,” then the budget should match what we are actually raising the credit limit of the United States to, because it both adds a certain level of internal discipline, but also a little more, shall we say, honesty in the debate and the discussion. Thank you, Mr. Chairman.
*Chairman Boustany. Thank you. And Mr. Webster?
*Mr. Webster. Thank you, Mr. Chairman. I personally don’t borrow money. I have no debt, whatsoever. And I don’t like debt. I hate it, despise it. And ‑‑ but there is a necessity here. From past congresses we have borrowed money. And we owe that money. And I think we ought to ‑‑ we are going to have to borrow it in order to pay the interest and the debt.
However, we are before the Ways and Means Committee, the oldest committee in the United States Congress, formulated in 1789. This ‑‑ you are a subcommittee of that ‑‑ we are in the Ways and Means Committee room. You derive your authority from Article 1 Section 7 of the United States Constitution, which says all bills regarding revenue shall originate in the House of Representatives. And this Committee is what does that. It doesn’t say what kind of revenue. It could be borrowed revenue, it could be tax revenue, it could be other ‑‑ but it is revenue.
And so, for sure, I believe that you have ‑‑ we have, as a Congress, and certainly this Committee has, as the Ways and Means Committee or a subcommittee thereof ‑‑ the ability, the authority, and the responsibility to set whatever revenue we are going to raise, including the fact that we might have to borrow some of that revenue.
*Chairman Boustany. Thank you, Mr. Webster. Mr. Lewis?
*Mr. Lewis. Well, thank you very much, Mr. Chairman, and thank you for yielding. I join you and welcome all of our colleagues here today, and I want to thank you for your testimony. But I must say to my colleagues and to you, Mr. Chairman, the simple answer today is that the United States of America must pay all of its bills as they become due.
Despite the testimony, our only legal option is to pay all of the bills in the order we receive them. The debt ceiling is about paying our bills. It is about paying for spending that the Congress has already approved. This great nation will not default on its bill. It will not. That is our history.
The leading House Republican bill discussed here today would pay China first. Yes, it would pay China first, before the Social Security checks of 56 million seniors, if they are even paid at all. This bill would pay China before the salaries of more than 2 million American military personnel, if they are even paid at all. This bill would pay China before food and nutrition programs for low‑income American families. This bill would pay China.
We are not going to enact laws that fail to pay hundreds of thousand of American businesses that provide goods and services to the government. This is not the American way. We will not enact a law that will pay China first before we pay unemployment compensation to Americans looking for work. It is unbelievable that House Republicans would think this is an option, to cast aside American families and American businesses.
We have struck a new low. I have been here now for 27 years, almost. This is a new low. After listening to the testimony, I would like to make an observation. The clear message that the Members on the panel are sending is that they, and perhaps the House Republican as a body, are thinking about a debt default by the United States Government. This is obvious from their testimony, because in the absence of default, there is no reason to consider the order we pay our bills.
The Treasury Department has made it clear that the only option we have if we reach the debt ceiling would be to pay all bills in the order they are received as money becomes available. There is no fair way to pick and choose among the many bills that come due. The Treasury Department makes over 80 million payments each month, Mr. Chairman.
I am submitting for the record a letter written by the Council of Inspectors General for the Department of Treasury to Senator Hatch dated August 24, 2012. This document makes clear that the only option is to pay all bills in the order they are received.
And with that, Mr. Chairman, I yield back and thank you for your kindness.
*Chairman Boustany. I thank the gentleman. Mr. Marchant?
*Mr. Marchant. Thank you, Mr. Chairman. I came out of a state legislative background before I came to Congress. I know many of you did. And before that, out of a city government.
And the change, the difference when I came to Congress that ‑‑ the most striking difference was when I was in city government and in the state government, when I made ‑‑ when I voted on bills that made decisions on spending, I knew that some time before that meeting or before that session was over that I would then have to make another decision on a bill that would raise the revenue to pay for the decision that I had made on the spending aspect of it.
And one of the first things that I discovered when I came to Congress was ‑‑ and I distinctly remember asking when I was a freshman ‑‑ is if I vote for this bill, what ‑‑ how much additional revenue will I have to vote for later in the session to pay for this program, or this event, or ‑‑ that I just voted for? And as all of you know, there is no distinct answer for that. It is basically, well, if we don’t have enough money at the end of the year, and we don’t’ have enough room on the debt ceiling, then we will have to raise the debt ceiling to ‑‑ in order to pay for those obligations.
And so, what has happened inside of our party in the time that I have been here is that there has began to be a growing responsibility, in my opinion. And especially in the last two years, responsibility among the Republicans not to talk about not paying our debts, not to talk about defaulting on our debts, but to have this kind of discussion that you are having today, and that is about tying the act of spending the money with the act of paying the bills.
And so, I appreciate the efforts that each one of you have put into their bill. I think that it is now ‑‑ when I stood up at a town hall meeting last week in one of my towns and talked ‑‑ and bragged about the fact that the Republican House had sent a budget over to the Senate that balanced in 10 years and we had not done that in many, many years, I was taken down a notch or two by someone in the audience with a very specific question. “How are you going to pay the bills in that 10 years? How are you going to fill the gap in that 10 years?” Because, obviously, even in the budget that we passed that balanced in 10 years, each of those years we have a deficit and that deficit is going to have to be financed.
So, as we begin to vote, and as we vote, I, as a member of the Ways and Means Committee, take it very seriously that, ultimately, it is the responsibility of the Ways and Means Committee to try to keep up with the raising of the revenue adequately to take care of the spending.
So, not only do I ask the question when I vote for a battlefield something or other bill, I ‑‑ the first question I am asking now is does this add to the cost of Federal Government. If it adds to the cost of Federal Government, is there money to spend to pay for that? If there is not money to pay for that, is that something I am willing to put the nation further in debt to do?
And, of course, there are some things that that kind of distinction is important. If it is to fund the troops, if it has to do with VA benefits, there are many things that the level of importance that those have I then am willing to make those decisions.
I appreciate the fact, Congressman Webster, that you have voted for the debt ceiling increases. Until all through the Bush administration, voting for the debt increases was regular standard operating procedure. Not talked about, not discussed. But I think the real importance of what we are doing today is that we are so much more aware of every single vote we make, so much more aware of the deficit, and so much more aware of how we are going to pay that deficit. Thank you, Mr. Chairman.
*Chairman Boustany. Thank you, Mr. Marchant. Mr. Kelly, you are recognized.
*Mr. Kelly. Thank you, Chairman, and thank you all for being here. Coming out of the private sector, it is almost impossible to sit here and go through some of these debates, because you start to wonder about where the reality really left the planet.
My question ‑‑ I mean it is not a question about do we want to pay our bills or do we not want to pay our bills. Of course we do. But this country is in bad need of a turnaround play. And I have never in my private life gone to a lender and said, “You know what? I need to increase my borrowing amount. The model I’m working with right now is going to make me bankrupt. So unless you give me more money I can’t stay open.”
And I have never had a lender say, “You know what? That is not a problem. Whatever you need, just go ahead and let us know and we will give you a check for it.” No, they always say, “Wait a minute. Wait, wait. You are on the wrong path. The trajectory doesn’t look very good to us. What is your turnaround plan? How you going to dial back your spending? How you going to prioritize your spending? How are you going to get your house in order?”
And I think ‑‑ listen. This is not about us paying our bills, and this is not about not being able to make Social Security payments. It is just the opposite. We don’t get our house in order, we don’t get ourselves on solid footing, where is this going to take place in the future? Everything that we are talking about today is not eliminating our ability to pay our bills, it is fixing the opportunity to pay our bills. We have got to get that turned around.
Now, Mrs. Bachmann, you have made some pretty good remarks about that, and all of you have. If you would just weigh in a little bit, because I think the disconnect is ‑‑ when I am back home, I got to tell you, you know what people say to me? The government needs to pick up the tab on this. And I say, “That is a good suggestion. Where do you think the government gets its money?” So I don’t know that people understand where the sources of revenue are and whose pockets they come out of.
So, if you would, Mrs. Bachmann.
*Mrs. Bachmann. Mr. Chairman, thank you, and also Mr. Kelly. I thank you for the remarks that you just made. And it occurred to me when the statement was made that we are now engaging in a new low, I will tell you what I heard over and over again in Minnesota from my constituents ‑‑ again, from young people ‑‑ is that they are seeing that this government is engaging in a war against the young. Because it is the young that is assuming the ever‑increasing tax burden.
You are talking about revenue. Mr. Marchant talked about revenue, and that it is the Ways and Means Committee that must look for the way to continue to enhance revenues to pay for this.
I will tell you one thing that 31‑year‑olds see is that they are being very disrespected by this government, because they are seen as the ATM machine, and it is their lives and it is their futures. These are young entrepreneurs that I spoke with, young businessmen, just like you began, Mr. Kelly, your career as a young businessman. These young businessmen are saying, “Where is my chance? Where is my opportunity?”
And if there is one message that we must not send out of this congress it is to the young entrepreneurs in this country that want to grow, wildly grow businesses, and create the new things that we need in this country. We must not tell them that we have declared a war on the young, that we are for them, not against them. That is the low, when we are telling them that they don’t have a future and they don’t have a hope. And I think this Committee is trying to send the opposite message, and I thank you for that. And, Mr. McClintock, as well.
*Mr. Scalise. And if I could, Mr. Kelly, because it was asserted by the Ranking Member about a threat of default again, nobody at this table wants default. And, in fact, if you have heard our statements ‑‑ I know you have ‑‑ we all want to make sure that default is not an option for anybody.
The only person I have heard running around this town talking about default is President Obama and some of his cabinet secretaries. And the President ought not have the option of default, either. And we take that away not only from Congress, we take that threat away from the President. And ultimately, we have got to stop having the President run around issuing threats, and hopefully have the President sit down and work with us on solving the underlying problem, on working with us on that turnaround plan that you talked about.
And I think a lot of that is envisioned in our budget. Our budget actually says in 10 years we will be balanced, and all of these threats are removed. Not only from creditors, but also from people who are on Medicare, which is ‑‑ under current plan goes bankrupt in 11 years. President Obama’s own actuaries confirm that. We remove that threat, as well, as all the other threats to our economy. So I thank your ‑‑
*Mr. Kelly. And I appreciate that. And the Ranking Member is a great man. But the American way is not to drive us into oblivion in the future by reckless spending and irresponsible spending. It is addressing the problems that we have today, and not just make some kind of a political statement, but actually do something substantive that shows the rest of the world. We didn’t get downgraded because of our ‑‑ we got downgraded because we had no turnaround plan. The lenders could not look at us and say, “You know what? You are a good risk, and we will keep you at those low rates.”
This is crazy. When the interest rates get to where they should be, I will tell you what. The balloon payment ‑‑ all we are doing is going to be making interest‑only payments into the future. We will have a balloon payment that, when it comes due, it is going to capsize this country and we will be in the same situation as all these other places that we are looking at in Europe right now. It is their inability to deal with their debt and their rising debt, and the inability to sustain that spending, other than through borrowing, that is causing the downgrade. It is not any other reason for it.
Thank you so much. And we have got to ‑‑ if we don’t fix this, all of these programs that our seniors and our most vulnerable rely on, we won’t be able to do it. It is the not fixing that is the problem. It is not ‑‑ talking about it isn’t the answer. We got to talk about it, we got to get it fixed. Thank you all, and thank you, Mr. Chairman.
*Chairman Boustany. Thank you, Mr. Kelly. Ms. Sanchez, you are recognized.
*Ms. Sanchez. I want to thank the chairman and the Ranking Member. And, oddly, I feel like we have slipped into the movie Groundhog Day, because here we are, having the same old discussion that we have had over the last two years, and we are just spinning our wheels. And I would have thought that Congress would have learned its lesson regarding defaulting on our obligations after the summer of 2011, but apparently not.
And I do say default, because the President doesn’t have the power to lift the debt limit. That power is vested in the Congress. The Congress decides. And when the Congress decides that they don’t want to increase the limit, that is what will lead to a default. And the only reason we talk about prioritization if default should happen is that it would be something that you all apparently would like to discuss in the event that a default happens.
I think that just threatening to not increase the debt limit has severe consequences that everybody just seems to ignore. And the fact is that after 2011, our nation’s credit was downgraded when there was threat of the limit not being increased. There was a drop in the S&P 500 of 220 points between July and August of 2011. And there was a 2,000 point drop in the Dow during the same period.
But here we go again, spinning our wheels. Instead of having hearings on things like job growth, which could perhaps bring in more revenue for our economy, or how we will protect seniors, we are discussing best how to become a deadbeat nation. And it is just the same old political talking point. It is not a solution about our debt and our deficit.
And we are considering today the merits of default prioritization legislation, and those are legislative options that simply assume that the U.S. skips out on paying its bills. We all know that the Treasury Department and the Council of Inspectors General on Financial Oversight have stated that there is not a legal option for prioritization. We all know that there is no fair or sensible way to pick and choose among the many bills that come due every single day.
On top of this all, even if it were legal to create that kind of prioritization, and the Treasury Department has assured us that they cannot, it is nearly impossible, logistically. The Treasury Department makes over 100 million payments a month, 100 million payments a month. And their computer systems are programmed to make those payments in the order in which the bills are received.
Maybe most importantly, even if debt prioritization were legally and logistically possible, a partial default, even a partial default, would be devastating to our economy. It is important to remind people that just the implication that the U.S. Government will reach the debt ceiling and not be able to pay its bills sends shock waves throughout our financial system. It creates uncertainty in the bond markets, it tightens credit, and it hurts job growth.
This hearing completely encapsulates the dysfunction of Congress. We are here to talk about legislation that is impossible to implement, and a waste, quite frankly, of our time and attention.
These do‑nothing bills create long‑term uncertainty at a time when businesses are begging for certainty. They are begging for us to get things settled in a way that allows them to plan. And our constituents are looking for that certainty. So I look forward to hearing, you know, as this further discussion is prolonged, what bills you all don’t want to pay first. Will it be Social Security checks to 56 million seniors and people with disabilities, or will it be the salaries of more than 2 million American military personnel? I have to say, quite frankly, I am disappointed that we are not talking about job growth or other worthwhile areas that are worthy of our time. And with that I will yield back the balance of my time.
*Chairman Boustany. I thank the gentlelady. Mrs. Black, you are recognized.
*Mrs. Black. Thank you, Mr. Chairman. And thank the panel so much for coming to us with what are some solutions to create some certainty.
So let me ask the three sponsors of the bills, just to set the record straight. Is there anything in your bills that say that we are not going to pay our debt? Mr. McClintock?
*Mr. McClintock. On the contrary ‑‑ and I think that the discussion from our friends on the other side forget the simple reality that most states already have debt prioritization provisions in either their constitutions or in California ‑‑ I would remind my friend from California the state constitution has just such a provision. It has never fomented a debate over not paying bills. It has only enhanced the credit of that state and every state that has them. This was the testimony of Ben Bernanke last year to the U.S. Senate.
I think my friends on the left also forget that the public credit is what is currently supporting all of these other programs. We are borrowing $.40, roughly, of every dollar we spend. If the public credit is damaged, all of those programs are threatened. That is why it has to be protected.
I think that the Ranking Member was right when he said that debates over the debt limit frighten credit markets. This bill assures that those markets can maintain confidence, even through debates over the credit limit. And I recall not long ago that U.S. Senator Barack Obama voted against raising the debt limit during the Bush administration. So this is not a debate between Republicans and Democrats. It is a debate over whether we can at least agree that whatever political winds are blowing in Washington, that the public credit will be honored, and the public debt supported.
*Mrs. Black. Thank you, Mr. McClintock. And, Mr. Schweikert, anything in your bill that would say, “We will not pay our debt”?
*Mr. Schweikert. No. And, Mr. Chairman and Congresswoman Black, and there is always this frustration of some of the disingenuousness on some of the rhetoric.
Basic reality coming this year. We have about 1.6 trillion that is in the roll and ‑‑ you know, because we have a fairly short WAM, our weighted daily average, that has to be refinanced this year. And stack on top of that additional debt that must be refinanced this calendar year. The United States will be in the debt markets for about $2.5 trillion. What happens if we don’t provide level visibility that debt obligations, our bond obligations, are our absolutely top priority and we are going to pay them?
So, you want to have rhetoric and say, “Oh, we don’t need this.” Laying this as a benchmark that we will line up paying our debt helps assure a level of stability in the future interest rates on U.S. sovereign.
*Mrs. Black. Thank you, Mr. Schweikert.
*Mr. Schweikert. You know, I don’t know why that even touches partisan rhetoric. I would think that would just be rational.
*Mrs. Black. And I want to go to you, Mr. Webster. Is there anything in your bill that would say we would not pay our service on our debt?
*Mr. Webster. Absolutely not. Life is about priorities. And we don’t have any here, unfortunately. What this does is establish the ones that I know exist as the priority, so that we can have a rational discussion about the debt limit and reducing spending. That is the key. But we have to have priorities.
If we didn’t have priorities already ‑‑ even though they are kind of lax ‑‑ we would be spending twice as much on every one of these programs that has been mentioned. But we don’t. Why? Because we sort of capped it, said, “This is all we could do.” Is that the optimum amount to spend? No, it is some amount that we came up with. How did we do that? Because we set priorities. Life is priorities, and we ought to understand that this congress ought to have a set of priorities that says, “This is the way we are going to pay our bills, these are the ones.”
Whether we end up not raising the debt ceiling or not, that is not the point. The point is what are the priorities of this congress, and we can set those by passing a bill that says, “Here are our priorities.”
*Mrs. Black. And I thank you so much for making this clear. And I want to be sure that we continue to talk about this creating certainty. Because what I hear as I am back in my district in my 19 counties from my job creators, and for those that are without job, is that there is so much uncertainty that comes out of Washington that it is Washington that has created the uncertainty that is keeping our economy from growing, causing poverty to grow, causing the unemployment to rise. We need to do things here in Washington that give the people of this country certainty.
And when the rhetoric is just the opposite of that, all we do is scare people more. I know that I am going to run out of time, and Mr. Schweikert is gone, but I think that there is such important conversation here about what happens if we continue to create this uncertainty, and that we don’t have a plan on how we take care of where we are with our crushing debt and our massive deficits that that is really going to rock the market. And when those interest rates start to rise because of the uncertainty, which ‑‑ what your bills do is create the certainty ‑‑ that we are really going to be in trouble.
So, thank you so much. I yield back the balance of my time.
*Chairman Boustany. Thank you. Mr. Davis.
*Mr. Davis. Thank you very much, Mr. Chairman. And I want to thank you, actually, for holding this hearing. And the more I listen, the more I am reminded of the fact that after all is said and done, generally much more said than actually done, the discussion that we are having is an interesting one.
But I think, after all of the discussing, the bottom line still remains the same. And that is if you have a debt you are expected to pay it. That has traditionally been the way that our government operates. That is the way our country operates. That is the way individual citizens operate. And that is what we are expected to do.
I would certainly agree that there have been instances where we have spent unnecessarily. As a matter of fact, we waged a war and spent enormous amounts of money unnecessarily. We have built weapons that we have never used, weapons that we had no need for. We have had budgets in many instances that made very little sense, no sense at all. And we talk about spending.
Well, we can spend or we can not spend, but we have already spent. And what we have already spent we must pay for. I am a fan of a fellow, Frederick Douglass, who lived some time ago, but he had some interesting ideas. He was fond of saying if he didn’t know anything else he did know one thing, and that is that we may not get everything that we pay for in this world, but we most certainly must pay for everything that we get, and that if we don’t pay one way we will pay another way.
And so, I don’t have any difficulty talking about a debt limit. But the reality is whatever we have spent, that is what we owe. And I also know that when you raise the question as to whether or not you might have the ability to pay, if you got to go into the marketplace and try to borrow money or get money, then wherever you expect to get it from, they are going to hold you hostage a little bit. They are going to raise the interest rates. They are going to charge you more. It is like individuals who don’t have much often times pay more. Well, I don’t want people to think that our country is in that position. I don’t think we want people to believe that we don’t have the ability to pay our way, to carry ourselves to the next level of being.
So, yes, there can be conversation about the limit. But the real deal is if you owe it you must pay it. And that is what our country is noted for, and that is what I think our country must do. And I thank you, Mr. Chairman, and yield back the balance of my time.
*Chairman Boustany. I thank the gentleman. Ms. Jenkins?
*Ms. Jenkins. Thank you, Mr. Chair. And thank you for holding a hearing on this very important issue. And I want to thank what is left of our panel for their leadership on this very important issue.
It is kind of sad that we are having this discussion. Wouldn’t it be nice if we would just do our jobs and balance the budget so we wouldn’t have to be talking about raising debt ceilings and prioritizing? I apologize I was a bit late. We were having a press conference about the President’s budget, which is expected any minute now, and it is expected never, ever, ever, ever to balance, only compounding the issue that is before us today. There is never a point into perpetuity where he thinks it is a good idea to stop spending more money than we take in.
But what I would like to ask you all is back in January we did have a full committee hearing on the debt limit, and we heard testimony to the challenges which would make prioritization difficult. And our friend from California, Representative Sanchez, I think mentioned it. But I wanted to give you all an opportunity to respond, because there was testimony in January just about the logistical challenges such as overhauling the computer systems at Treasury, further delaying payments, and just questions in general how they may handle that. And I wanted to give you all a response. What would you say to those critics that bring that up?
*Mr. McClintock. If I may, California is not exactly what you would call the paradigm of good public management. But they have had no problems prioritizing their debts in the past. And the debt prioritization provision on the state constitution, as I said earlier, has never been used as an excuse not to pay bills. What it does is to assure credit markets that, despite dreadful management by the State of California, there is still a pretty good credit risk, because first call on their revenues will go to debt service.
If the State of California can order its priorities under a debt prioritization bill, there is no reason that the Federal Government can’t, unless the excuse is this is a worse‑managed operation than State of California. And heaven forbid that should be true.
*Ms. Jenkins. That is hard to fathom, isn’t it? Representative Webster.
*Mr. Webster. Well, I would like to read what the Department of Treasury said. “We are aware of no statute or any other basis for concluding that the Treasury is required to pay outstanding obligations in the order in which they are presented for payment, unless it chooses to do so. Treasury is free to liquidate obligations in any order it finds which will best serve the interest of the United States.”
Now, I say that to say this. From personal experience, if you have ever done business with the United States Government, there is no possible way they have a pecking order. When you receive the bill you may or may not get paid. It may be 60 days, 90 days, 120. Oh, yes, there are statutes that say they have to pay you, but they don’t. And so, whoever believes that they pay the bills as they come in is living in Fantasyland, which is in my district. And I will tell you it is not true. Just go out in the real world. Ask a contractor or someone else, and they will tell you how it really works.
*Ms. Jenkins. Excellent, thank you. I yield back.
*Chairman Boustany. Thank you, Ms. Jenkins. Mr. Crowley.
*Mr. Crowley. Thank you, Mr. Chairman, and I appreciate the opportunity to have the chance to say a few words.
I have grave concerns about being here and discussing the plethora of legislation that my colleagues have put forward. I note the concern about rhetoric and partisan rhetoric. I would just note for the record that every one of the individuals who has testified today is from one political party. It is not bipartisan, in terms of the testimony given. I think the requirement would be that you had to introduce deleterious legislation in order to be invited to testify before the committee today. That is my personal opinion, it is no regard to the chairman or to the ‑‑
*Chairman Boustany. If the gentleman would yield just for a moment, the subcommittee welcomes any testimony.
*Mr. Crowley. I understand that.
*Chairman Boustany. Any submission.
*Mr. Crowley. Reclaiming my time, that is why I say it is not to you, in terms of my observation in terms of the bills that are before us and the individuals who are offering them and as to why they are here before the Committee today.
What the Majority, the Republic Majority, is doing with this hearing is announcing to the world, in my ‑‑ again, my judgment ‑‑ that everyone from small businesses who sell services to the government to the grandmothers buying savings bonds for their grandchildren that this Congress is serious about not paying our nation’s bills, that vendors and grandmothers may invest in the U.S., but that the U.S. will not invest back in them.
This congressional majority is telling the world that they think the U.S. is a deadbeat nation, and I could not disagree more strongly. But what is also very telling about this debt prioritization debate is who, in fact, is the priority of the Majority in their vision of America. We are seeing it today. The Republicans place as their top priority international bankers. The top priority of Republicans prioritizes these foreign bankers above American seniors, American veterans, and America’s enlisted military personnel and their families.
Now, everyone in this country recognizes that it was President Clinton and the Democrats who led our nation to prosperity and created multiple years of budget surpluses, what Bill Clinton famously summed up as arithmetic. And the American people also know it was the Republican party that ended these surpluses, bankrupted the treasury and added trillions of dollars in debt to the nation’s credit card, a debt they have not taken a single serious step towards addressing. And my colleague mentioned the two wars that we entered to.
But what is more out of whack ‑‑ at the same time giving the largest tax cut in the nation’s history ‑‑ what is more out of whack with the nation’s values and priorities is their plan to put Chinese bankers first. Under the plan being advanced today, Chinese bankers will get their money first before senior citizens on Social Security. I am not making that up. That our American war heroes, the brave men and women who served or are currently serving our nation in uniform will have to wait behind Swiss bankers for their VA benefits or combat pay or, God forbid, their death benefits.
Speaker Boehner, Mitt Romney, George Bush, and their political party are telling the country that they are okay paying off international bankers in every corner of the world ‑‑ Beijing, Shanghai, Tokyo, and Zurich ‑‑ but refuse to honor the payments to VA doctors, cancer researchers, school teachers, meat inspectors, and FBI agents. I oppose that awful concept, and I oppose this awful concept of putting Americans last. And with that I will yield back the balance of my time.
*Chairman Boustany. I thank the gentleman. Are there any other questions? Mr. Reed, you have any questions?
*Mr. Reed. No. Thank you, Mr. Chairman.
*Chairman Boustany. Okay. With that, I ‑‑ just a few final observations. It has certainly been said by the former chairman of the joint chiefs of staff that the debt of the United States constitutes the single largest threat to this country. And I think it is appropriate that this body, this Committee in particular, have this type of discussion, an open discussion where the jurisdiction on these issues actually lies, and to thoroughly explore the issue.
And so, no one is advocating, as the panelists said, as some of us have said here, nobody is advocating that ‑‑ the default of the United States, or that the United States will not pay its obligations. We are just simply saying we are going to have that discussion, it needs to be an honest and open discussion, and ‑‑
*Mr. Crowley. Will the chairman yield for just a ‑‑
*Chairman Boustany. I will yield to the gentleman.
*Mr. Crowley. I think what they are suggesting is that they will not pay ‑‑ some entities will get preference pay, they will get it before others, and some may very well be defaulted upon and not receive any payment.
*Chairman Boustany. Well, we are at the point now of exploring whether this is ‑‑ these are feasible options, going forward. I mean I think the fact of the matter ‑‑ we all recognize that the real threat, the real problem, is the debt of the United States and the ability to meet those obligations in the future.
And so, with that, I would just like to thank the witnesses for being here today, and also to be advised that Members may have some additional questions they may want to submit. All that would be made part of the record. And with that, this hearing stands adjourned.
[Whereupon, at 11:20 a.m., the subcommittee was adjourned.]
Member Submissions For The Record