In a speech on the Senate floor Thursday, Senate Finance Committee Chairman Orrin Hatch (R-Utah) outlined concerns regarding the nation’s more than $18 trillion debt and called on the Obama Administration to work with Congress to find a responsible path forward to ensure the nation does not default.
“As we contemplate another debt limit increase, President Obama doesn’t see the need to even talk to Congress about our fiscal future. In fact, the administration won’t even take a clear position on how much of an increase it believes is appropriate or how long it should last,”said Hatch.
Hatch has repeatedly called on the Obama Administration to improve its communication and increase its transparency of debt management policies.
“Let’s be clear: Neither the administration’s uncompromising stance on fiscal reforms nor its selective use of information about our nation’s debt are productive,” said Hatch. “The President’s refusal to work with Congress on a path forward and to share information about our nation’s finances is irresponsible brinksmanship.”
At more than $18 trillion, the national debt today stands at a historic high. It breaks down to $57,000 of debt for every U.S. citizen – every man, woman and child from age one to 101. For the people in Hatch’s home state of Utah that means $167 billion of debt.
The complete speech, as prepared for delivery, is below:
Mr. President, as we are apparently approaching another deadline with regard to the statutory debt limit, I’m reminded of the old paradoxical proverb: “The more things change, the more they stay the same.”
We have, of course, dealt with the debt limit here in Congress on numerous occasions. And, while there are significant differences this time around, there are some things that, particularly when we’re dealing with the Obama Administration, just don’t change.
One thing that’s different is that our national debt is higher than it has ever been before – more than $18 trillion, an astronomical number. That is $57,000 of debt for every U.S. citizen – every man, woman and child from age one to 101. Just for the people in my state of Utah, which has a relatively small population, that means $167 billion of debt.
And, as a share of our GDP, the debt is higher now than at almost any time, with the exception of a brief period surrounding World War II.
Yet, even though our debt has gotten further and further out of hand under this President, the administration’s approach has not changed.
As we all know, Treasury Secretary Lew recently sent a series of letters urging Congress to raise the debt limit. In his latest communication, he projected that, on November 3, the Treasury will begin to run dangerously low on cash, creating an unacceptably high risk of having to delay payments. Of course, we don’t have an ability to verify that projection, and Treasury has long been uncooperative in Congress’s efforts to get more information as to how they arrive at these specific dates.
Don’t get me wrong, I take the November 3rd date seriously. I think we all should.
But, given the lack of hard data shared by Treasury regarding these projections and the fact that the date has, in just the last few weeks, moved around a little, I do understand why some people appear to believe that this latest best guess from Treasury is fungible.
In addition to providing the November 3rd deadline, the latest debt limit letter from Secretary Lew includes what has become a stale set of talking points punctuated by the admonition that “only Congress can extend the nation’s borrowing authority.”
Now, I know no one wants to hear a civics lesson. But, given the administration’s repeated attempts to assign all responsibility relating to the debt limit to Congress, it appears that a short refresher about how a bill becomes law might be helpful.
No one disputes that Congress must act to extend the government’s borrowing authority. But, the President can also sign or veto any debt-limit legislation we pass. The same is true of any legislation authorizing or appropriating spending increases or reductions – Congress writes and passes legislation, the President signs legislation into law and, hopefully, does his best to enforce it.
In other words, Mr. President, both Congress and the executive branch share responsibility with regard to the debt limit and our nation’s overall fiscal health. Unfortunately, rather than trying to work with Congress on these issues, the Obama Administration has repeatedly chosen to try to deflect responsibility with misleading statements about the various burdens born by the separate branches of government.
Sadly, the Treasury Secretary’s tired arguments with regard to the debt limit aren’t the only problem. In fact, when you examine this administration’s record, you’ll find that the problems are much, much worse than most want to admit. I’m talking, of course, about the massive accumulation of debt we’ve seen under this administration, as well as the lack of leadership and willingness to work with Congress to address what we know are the main drivers of our debt.
As the nonpartisan Congressional Budget Office has repeatedly made clear, the main drivers of our debt are our unsustainable promises in the Social Security benefit programs and unsustainable spending on the federal government’s major health care programs – Medicare, Medicaid, health insurance subsidies under the Affordable Care Act, and others.
True enough, we’ve seen some deficit reduction in recent years. These days, the President and his allies are always quick to point that out.
Of course, we know that these temporarily reduced deficits have resulted predominantly from increased tax receipts and only modest spending restraint. Still, even with these reduced deficits, our debt remains well above the historic average and is expected to grow even more in the near future as, according to CBO, our deficits will start to go back up in the next few years.
Simply put, no one in this administration should be bragging about supposed fiscal responsibility.
Under this administration, the outstanding public debt has risen by more than an astounding $7.5 trillion, a 71 percent increase. And, once again, as a share of the economy, our current debt remains at levels that, with a very narrow and understandable exception, are heretofore unseen in modern U.S. history.
According to CBO, by 2025, federal debt held by the public will be roughly twice the average of the past five decades. And as CBO says: “Such high and rising debt would have serious negative consequences both for the economy and for the federal budget.” Given this risky path of debt accumulation, CBO also warns of increasing risks of a federal fiscal crisis.
Unfortunately, those dire warnings have been ignored by the administration. Instead, the administration seems to believe that a temporary lull in deficits is a good time to accelerate spending – even though spending grew well above growth in the economy last fiscal year – all while they continue to ignore the growing crisis in our entitlement programs.
When he was serving in the Senate and a different party controlled the White House, President Obama famously argued that an increase in the debt limit was a sign of leadership failure. Now, his definition of leadership is to assign all responsibility to Congress for the debt limit.
And, when he was running, as then Presidential Candidate Obama, he pledged not to kick the can down the road on reforming entitlements, particularly Social Security. Now, he shirks responsibility and his proposed solution to the most immediate problem with Sociality Security – the Disability Insurance Trust Fund – is to kick the can much, much further down the road without any changes or reforms to the program.
Mr. President, I believe that the debt limit has and can play a role in promoting fiscal discipline.
Historically, debates over the debt limit have provided opportunities to reexamine our fiscal outlook and, when necessary, make corrections. And, debt limit votes give a voice to members of Congress who do not serve on committees that make the spending and tax decisions.
Unfortunately, as we contemplate another debt limit increase, President Obama doesn’t see the need to even talk to Congress about our fiscal future. In fact, the administration won’t even take a clear position on how much of an increase it believes is appropriate or how long it should last.
Common sense would indicate that the President would like Congress to extend the debt limit past next year’s election. That would be a debt limit hike of around $1 trillion.
One trillion dollars would mean more than $3,000 per person in the U.S. just to get us through next year. Utah’s share of that would be about $9 billion.
Yet, while the President undoubtedly wants at least that much of an increase, he refuses to make any such desire known. Instead, we’ve gotten vague demands that borrowing authority be extended by certain dates and threats to veto any such extension that comes with even modest spending reforms.
Essentially, President’s Obama’s position is: It’s my way or the highway. But, oddly enough, he doesn’t want to explicitly define what his way is and he repeatedly argues that he plays absolutely no role and bears no responsibility in getting us there.
Make no mistake, Mr. President, I don’t want to see a default.
Default on U.S. Treasury securities and failure to pay federal obligations – which, by the way, are two separate things – is not a desirable or acceptable outcome. Ultimately, I don’t believe Congress should shirk its responsibilities even if President Obama refuses to acknowledge his.
But let’s be clear: Neither the administration’s uncompromising stance on fiscal reforms nor its selective use of information about our nation’s debt are productive. The President’s refusal to work with Congress on a path forward and to share information about our nation’s finances is irresponsible brinksmanship.
I want to talk about that information-sharing for a few minutes, Mr./Mme. President, because it is an important part of this continual impasse between Congress and the administration when it comes to the debt limit.
When we talk about our nation’s debt, there are other policy matters at play besides the periodic actions taken to raise the debt limit. The administration is charged with managing the debt in a responsible and effective manner, and toward that end, it has an obligation to preserve the integrity of Treasury securities markets.
Congress has a duty to exercise oversight of these activities. And, as chairman of the Senate committee with jurisdiction over these issues, I have to say that, when it comes to accountability and transparency on these matters, a great deal of improvement is necessary.
And, that’s putting it kindly.
For example, each time the debt begins to approach the statutory limit, the administration makes a lot of noise about how it is difficult to deal with delayed payments on Treasury securities. Please note that I am talking about payments on securities, not general payment obligations of the federal government for spending programs, which is a separate matter.
Now, a number of scenarios could give rise to delayed payments on Treasury securities. One of those scenarios is a debt limit impasse between Congress and the administration. But, there are others, including weather events, cyber or terrorist attacks, or any number of known risks that responsible debt managers must take into account.
We know for a fact that the Treasury Department and the Federal Reserve have developed contingency plans for these types of risks. The existence of such plans has been made public in minutes of the Federal Reserve’s Federal Open Market Committee, and in minutes of meetings involving Fed and Treasury officials and representatives of large financial firms.
However, the administration has flat-out refused to share those contingency plans with Congress or to even openly acknowledge their existence.
I have been the lead Republican on the Senate Finance Committee since January 2011. And, I have been asking to see those plans since the summer of 2011. Over more than four years and through multiple requests for information, I have been told a number of things, usually stories that end with a claim that, even though plans have been discussed, nothing has ever been formalized.
So, there are really only two plausible conclusions to be drawn: Either the administration is being dishonest with Congress and they have contingency plans in place, or the administration is being irresponsible by failing to account for obvious potential risks. Apparently, they are comfortable with Congress – not to mention the American people – reaching either one of these conclusions if it means they don’t have to share more information.
Simply stated, there is no reason for Treasury and the Fed, along with large financial firms participating in the Treasury securities markets, to formulate contingency plans for these markets without reporting them to Congress or sharing them with the Senate Finance Committee.
No reason whatsoever. Yet, here we are.
Sadly, this lack of transparency doesn’t end with obviously needed contingency plans.
As I alluded to earlier, Treasury also shares very little information with Congress concerning cash forecasts, particularly as we approach the debt limit.
I have asked for detailed contemporaneous updates of cash forecasts in order to, among other things, properly verify Treasury’s debt limit projections. And, in response, Treasury officials have told me that those projections are “highly market sensitive” and, at times, cannot be shared with Congress.
Yet, I have to assume that a number of officials at Treasury and probably the Fed have access to this sensitive data. And, I’m not aware of any special security clearance assigned to these individuals.
It is evidently the position of the administration that there are times when it is neither Congress’s nor the American people’s business to know how much cash Treasury expects to have in the federal till.
This needs to change, Mr. President.
Given my oversight responsibilities as Chairman of the Finance Committee, I am always interested in preserving the integrity and efficiency of markets for Treasury securities.
Unfortunately, under our laws, regulatory and oversight authority with respect to these markets spreads far and wide, with responsibilities spanning across the Treasury, the Fed, the Securities and Exchange Commission, the Commodities Futures Trading Commission, and an alphabet soup of other groups.
As we saw with the most recent financial crisis, this type of balkanization of authority inevitably leads to ineffective oversight and regulation. When problems arise, all the various parties point their fingers at each other. Everyone has authorities, yet no one ends up accountable.
Unfortunately, the so-called Dodd-Frank legislation did not fix many of these problems. In fact, I’d argue, all it did was give existing regulators yet more authority and add a few more acronyms into the mix.
All of this is relevant to current discussion about the debt limit because it speaks to the overall management of our nation’s debt and the lack of transparency among all of these agencies. I can cite numerous examples where a lack of communication and accountability has been problematic. For now, I’ll briefly mention three such instances.
First, in 2013, Treasury began auctioning something called a “floating rate note,” the first new Treasury security since inflation protection securities were introduced more than 15 years ago. This was a significant debt management decision, yet very little information was shared with the Senate Finance Committee, even though Treasury had many discussions about the new note with representatives from large financial firms.
Second, Treasury recently decided – again after several meetings with large banks – that an average cash balance for the federal government of around $50 billion per day was too low and that, going forward, the balance would need to be $150 billion or more. Once again, prior to that decision being finalized, there was no communication from Treasury to the Senate Finance Committee.
Third, on one particular day in October 2014, there were unusual and difficult to explain events in markets for Treasury securities. While all the various regulators and interest groups have issued staff reports and have held meetings and seminars relating to the apparent volatility demonstrated by these events, I am not aware of any outreach or information sharing with the members or staff of the Finance Committee.
Again, these are just three examples. There are certainly others. And, all of them demonstrate that this administration is far too often unwilling to even provide simple updates about its debt management policies, all while insisting that Congress repeatedly raise the debt limit without asking questions or attaching reforms.
This also needs to change, Mr. President. If the administration is going to continue to demand that Congress act to increase the debt limit, then it should, at the very least, be more forthcoming about its policies and decision-making when it comes to managing our debt.
While I agree that we cannot and should not risk defaulting on our debt or other obligations, it is essential that Congress receives a complete picture from the administration about its debt management policies.
Therefore, today, I want to make clear to Treasury and other agencies with responsibilities in this area that there is an imminent need for improved communication and increased transparency on these matters. As Chairman of the Senate Finance Committee, I intend to do all I can to ensure greater accountability.
That may include more hearings with officials brought before the committee or legislation to require more information flows between the administration and Congress. Ultimately, what specific actions we take will depend on the administration’s ability to cooperate.
With that, I yield the floor.