Baucus Floor Statement Regarding the Debt Limit

Mr. President, Ralph Waldo Emerson enjoined: “Pay every debt, as if God wrote the bill.”

Today, we will debate whether the United States will continue to pay its bills. We will debate
whether the United States will continue to pay the interest that it owes on the money that it has
borrowed.

The spending laws that created the current national debt are behind us. The only question that
remains is whether the Government will honor its obligation to pay the bill. We have gone to the restaurant. We have eaten the meal. Now the only question is whether we will pay the check.

To state the question is to answer it. We simply must do so.

The legislation before us would increase the limit on the amount of money that the U.S.
Treasury can borrow. If Congress does not enact this legislation, and soon, then the Treasury
would default on its debt for the first time in history.

If Congress does not enact this legislation, then the Government would fail to pay benefits to a
portion of Social Security recipients. The Government would fail to pay benefits to a portion of
the beneficiaries of all other Federal programs.

That would plainly be unacceptable. Plainly, we must enact this legislation.

When the Federal budget runs a deficit, the U.S. Treasury must borrow money to make up the
shortfall. That shortfall results from laws — enacted in the past — that spent money and cut
taxes.

It we want to avoid the need to borrow, then Congress and the President must enact laws that
will cause the Federal Government to spend less or raise more in the future. Simply preventing
the Treasury from borrowing more money is not the solution.

If Congress does not allow the Treasury to borrow more money, then the Treasury will not have
the money to pay all bills that come due.

The Treasury has no legal authority to prioritize spending and pay only the most important bills.
The Treasury does not even have a way to determine which are the most important bills. If the
debt ceiling is not raised, the Treasury would have to pay bills on a first-come, first-served basis.

Some of these bills would be interest payments on previously-borrowed money. If the Treasury
does not pay these interest payments, then the Federal Government would default on its
financial obligations. That would be the first time in the history of the country.

If that were to happen, financial entities would be afraid to loan the Treasury money. They
would charge astronomically higher interest rates. This would only worsen our already high
budget deficits.

In some situations, financial entities would not loan us money at all. This could prevent the
Federal Government from meeting all of its programmatic commitments.

But the disastrous economic effects would go well beyond that. The price of Treasury securities
in the secondary markets would drop. This would cause an immense wealth loss for owners of
assets in many other financial markets. And this, in turn, would cause untold damage in those
markets and further worsen the recession.

What’s more, the value of the dollar would drop. This would increase inflation in the U.S. And it
could well end the dollar’s role as the reserve currency of the world, further exposing the
American economy to global economic forces beyond our control.

In addition to paying interest costs, the Treasury pays many other important bills. Among those
bills are Social Security benefits.

If Congress does not raise the debt limit, then Social Security benefits would have to compete
for funding on a first-come, first-served basis with all other Federal payments. If Social Security
payments did not come up for funding first, then they would not be paid.

Clearly, we should not let this happen either. The conclusion is simple. We must raise the debt
ceiling.

Federal budget deficits are at record highs. Why is that so?

The reasons are simple. We have been — and still are — in the deepest recession since the
Great Depression. And we have been in an unprecedented financial crisis. The current
administration inherited both of these problems.

How have these problems contributed to record deficits?

First, the recession directly affects the Federal budget. The recession has caused revenues to
fall to record lows. Since 1970, the Federal Government has collected an averaged of 18
percent of the GDP in tax revenues. In 2009, however, revenues accounted for only 14.9
percent of GDP.

Meanwhile, the recession has required much greater sums to be spent on unemployment
benefits and Medicaid payments.

Second, Congress has had to pass legislation to fight the recession. We needed to enact a large
stimulus package to foster economic growth. The package that Congress enacted provided
stimulus of about $185 billion in fiscal year 2009. And it is estimated to provide stimulus of
about $400 billion in fiscal year 2010.

This package has done some good. It has significantly increased economic growth.
Regrettably, the package has not produced enough jobs yet. The Finance Committee will be
looking at additional options to increase job growth as soon as we can turn to them.

But let’s be clear. If Congress had not enacted the stimulus package, then the country would be
in a depression instead of a recession. The stimulus package was the right thing to do.

Third, as a result of the financial crisis, the Bush Administration asked for and Congress gave it
legal authority under the Troubled Asset Relief Program, or TARP. TARP gave the President
authority to help financial institutions, as well as the struggling automotive industry, to weather
the financial storm. The Bush Administration was using these authorities before the Obama
Administration took office.

So the recession and financial crisis created needs that in turn led to high deficits and record
borrowing.

How do we reduce such commitments for the future- How do we avoid having to borrow such
huge sums of money in the future?

First, we have to fix our health care system. The current health care system has led to
skyrocketing costs in Medicare and Medicaid. To reduce those costs for the long run, we need
to pass comprehensive health care reform.

And that is exactly what we are doing. In late December, the Senate passed health care reform.

And according to the non-partisan Congressional Budget Office, our health care reform bill
would reduce Federal deficits by $132 billion in the first 10 years. Our bill would reduce Federal
deficits by $650 billion to $1.3 trillion in the second 10 years. And this deficit reduction is likely
to continue in subsequent decades.

Second, after we do all that we can to increase job growth, we need to start working on deficit
reduction for the coming decade and subsequent decades.

Because the economy was in a deep recession, and the financial markets were frozen, the
Government borrowed a lot of money. Once the recession is over, we have to reduce
borrowing to fiscally responsible levels. We should begin as soon as we can.

But in the meantime, we cannot allow the Nation to default on its debt. We cannot allow
benefits from programs like Social Security to be paid on a first-come, first-serve basis.

No one enjoys raising the debt limit. No one enjoys paying debts. But it is simply what we must
do, to honor our commitments.

There were times when the Senate has joined together in recognition that we have this
obligation. Four times in the last 26 years, the Senate has raised the debt limit by unanimous
consent. The Senate did so as recently as 1996, under a Republican Senate and a Democratic
President. And the Senate did so three times in the 1980s, under a Democratic Senate and
Republican Presidents.

It has been more than 17 years since the Senate last divided strictly along party lines on a debt
limit vote. We have raised the debt limit a dozen times since then. Honoring the Nation’s
obligations should not be a partisan matter. And it usually is not.

And it has until recently not been the practice of the minority in the Senate to filibuster debt
limit increases. Under President George W. Bush, the Senate raised the debt limit four times
with simple majorities — with fewer than 60 votes. The Senate did so twice under President
Reagan, as well.

All but four sitting Senators have voted for a debt limit increase at one time or another in their
careers. Among sitting Senators who have served in more than one Congress, only one Senator
has never voted for a debt limit increase.

So I call upon my Colleagues to rise to the occasion. Let us pay our debts. Let us honor our
obligations. And let us allow the debt limit to be raised.

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