Prioritizing Debt

Floor Speech

Date: July 28, 2011
Location: Washington, DC

Madam President, last January--probably late in the month I think it was--it occurred to me that as we proceeded in the direction of approaching the statutory limit of our borrowing as a government, the discussion was becoming a little bit counterproductive in some respects. One, in particular, was this constant threat we would default on the loans we had taken out as a government, the bonds that were held by millions of Americans, and that a default would have cataclysmic repercussions. It occurred to me that this is an unproductive discussion, in part, because no such default was ever going to happen. Certainly, it didn't need to happen. In the event we didn't raise the debt limit upon reaching it or prior to that, we would have enough ongoing tax revenue to cover the debt service by many multiples.

So I introduced legislation that would clarify this. It would take this risk off the table and try to provide some clarity to markets and to senior citizens who are savers and who have invested their savings in Treasurys and to have a constructive and honest debate about what the implications are of reaching the debt limit without raising it. So I introduced a bill that would instruct the Treasury Secretary to prioritize debt service in the event we didn't raise the debt limit upon reaching it.

Unfortunately, the idea was dismissed by the administration. It was derided. It was castigated. It was described as reckless and irresponsible and unworkable. This idea of prioritizing the payments we would make if we didn't raise the debt ceiling was dismissed out of hand.

Now we have two reports that have come out this week. One cites the fact that senior Treasury officials have been calling around to big banks assuring them that in the event we don't raise the debt ceiling, which we will hit within just a few days, Treasury is assuring the banks there will be no default; they have this covered, and they have taken care of this. The scheduled interest and principal payments on our bonds will occur on schedule.

It is nice that the administration is informing the banks of this. I think it would be nicer still if they would inform the American public and everybody who has such an important stake in ensuring that the U.S. Government not default on its debt. So that was the first report.

The second report came out just late last night--and it has been confirmed today--which is that the Treasury has, in fact, been working on a plan of the very nature they have been deriding and denying for many months now; that they, in fact, have been developing and are continuing to refine a plan to prioritize the payments that will be made in the event the debt limit is not raised by August 2.

I am glad they have finally come to this conclusion. I wish they had approached Congress and worked with us constructively many months ago when I first suggested we ought to have a plan B, but I would say it is better late than never. But now I think we ought to get this plan, such as it is, exposed to the sunshine of public discourse. We ought to understand what this process will be and Congress ought to have a role in it.

That is why I introduced an updated version of this bill last week. I have 33 Senate cosponsors on the bill. The purpose of the bill is not to be a substitute for raising the debt limit. I understand if we don't raise the debt limit close to August 2, the results will be very disruptive. We can minimize that disruption if we have a game plan, and we ought to work this out. The bill I introduced with a number of colleagues is a bill that identifies three very high priorities, that we ought to make sure we make these payments, whether or not we raise the debt ceiling. We know we will have enough money to do so, and I think we have an obligation to do that.

The three categories embodied in our bill are, first, interest on our debt. By making sure we make those payments we avoid a catastrophic default and we avoid the financial consequences which could be very dire. So that ought to be one of the top priorities. The second, equally important, is making sure we send out all the Social Security checks in full and on time to everybody who has one coming. Senior citizens all across America, including my parents, depend on Social Security checks, and they have earned those benefits by virtue of the contributions they made into that system, in many cases, for many decades.

The third and final item I think ought to be prioritized in the event we don't raise the debt ceiling by August 2 is salaries paid to Active-Duty military. I think the men and women who are risking their lives for all of us deserve to have the peace of mind of knowing that their families back home will not have to wait until Congress gets its act together for them to get their paycheck in arrears. It ought to be done on time.

So these three items, if we add them all and look at the amount they would cost during the month of August and we compare that to the tax revenue that is going to come in the door in August, these three expenses are less than half the amount of tax revenue that is going to come in. Clearly, and obviously, this is easily manageable--or easily affordable, I should say.

Technically, the Treasury and the Fed have some work to do, no doubt, to make sure this is all done smoothly. That is precisely why they should have engaged with us a long time ago, so we could have had a constructive period of time to work out whatever details are necessary so we could have as smooth a functioning process as possible--one that would have the benefit of a transparent debate.

I acknowledge there might be other items that ought to be added to the list, and we ought to have a debate on the floor to consider those items. What we would end up with is a process that the American people would understand, they would know, they could anticipate, and it would be far more constructive. It is getting late in the day, but maybe it is not too late. I hope this body will take up my bill and it will have that debate, we will have some kind of resolution, and we will provide some guidance. I think it is part of our constitutional obligation to have control over spending that occurs in our government, and this should be no exception.

I urge my colleagues to join me in supporting this legislation. If my colleagues have constructive suggestions of how we can make it better, I welcome them, as I welcome working with the Treasury and the administration, to make sure that we, in the unfortunate event--if it should occur--that we don't raise the debt ceiling by August 2, do everything we can to minimize the disruption that will follow.

I yield the floor.