[Congressional Record Volume 141, Number 149 (Friday, September 22, 1995)]
[Senate]
[Pages S14144-S14146]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         ORDER FOR ADJOURNMENT

  Mr. CHAFEE. Mr. President, if there is no further business to come 
before the Senate, I now ask the Senate stand in adjournment under the 
previous order, following the remarks of Senator Byrd.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. CHAFEE. Now, Mr. President, we have the opportunity to hear the 
distinguished Senator from West Virginia.
  The PRESIDING OFFICER. The Senator from West Virginia.
  Mr. BYRD. Mr. President, I thank my friend, the distinguished Senator 
from Rhode Island [Mr. Chafee] for his courtesy.
  Mr. President, I want to be very observant of the rules of comity 
that exist between the Senate and the House. And, so, I seek never to 
call the name of a Member of the other body. I think the rules of 
comity are very important and I hope never to violate them.
  However, Mr. President, I cannot allow the recent comments made by a 
Member of the other body, regarding a possible government-wide default, 
to go unanswered. Both the Washington Post and the New York Times today 
contain articles that suggest that a leading Member of the other body 
is willing to put the United States into default in order to coerce the 
President of the United States into swallowing a set of budget 
proposals that large segments of the public and the Congress consider 
to be extreme.
  A Member of the other body has reportedly stated, ``I don't care what 
the price is,'' and is also quoted as saying that he does ``not care if 
we have no executive offices and no bonds for 60 days--not this time.'' 
He has further stated that he would use his office to prevent a vote to 
increase the debt limit until the President agrees to his proposals for 
balancing the budget.
  That Member may not care, Mr. President, but I do. I care very deeply 
about the welfare of the United States and the people of the United 
States. This kind of arrogant brinkmanship can do irreparable damage to 
the United States, to its creditworthiness, and to its international 
standing. It could have long-lasting effects on the world stock and 
bond markets, with unseen ramifications for U.S. interests around the 
world. That is very careless--careless talk, Mr. President.
  With each passing day, we climb ever closer to the $4.9 trillion 
ceiling on Federal debt imposed by Congress in 1993. We may hit that 
ceiling as early as the end of October, or as late as mid-November, but 
hit it we will, as sure as I am standing here today, unless action is 
taken soon to increase that limit. In the first 5 days of November, the 
Government must pay $50 billion in Social Security benefits, Medicare, 
and active-duty military pay. On November 15, some $25 billion in 
interest payments will be due on interest payments on the debt. Without 
an increase of the debt ceiling, the Government may be able to limp 
along until these payments are due, but no amount of accounting 
legerdemain will cover these large payments. Without an increase in the 
Government's ability to borrow, Government checks would not be honored. 
For the first time in history--we have been talking about history here 
today--the United States would default. It is almost inconceivable for 
me to imagine the Government of the United States bouncing a check, but 
that stark possibility looks us right in the face.
  A Government default is not something to be taken lightly, as the 
author of the reported remarks seems to feel. This is a very, very 
serious issue. It does not just mean that ``executive offices'' might 
be shut for 60 days. It does not just mean that there will be ``no 
bonds'' for 60 days. It is far more devastating than that glib picture 
would imply. The Congressional Research Service paints a far darker 
scenario. Let me quote the CRS report:

       It is difficult to describe the extent of the problems the 
     Government would face if the debt limit were not increased 
     when needed. Under current Federal borrowing needs (for 
     1996), the effect would be similar to a 10 percent reduction 
     in spending with no preplanning and uncertain authority to 
     rank activities by importance. From past experience, most 
     non-essential operations of the Government could be shut 
     down. Most Federal employees might be sent home. National 
     parks and monuments could close. Regulatory activities could 
     cease. Discretionary Federal activities would probably be cut 
     back as much as possible so that mandatory activities could 
     be paid for. Depending on how long the situation lasted, 
     employees, and eventually beneficiaries, could stop receiving 
     checks from the Government. Government bondholders might not 
     receive their interest payments. Federal construction 
     projects could stop. Payments to State and local governments 
     could stop. Federal contractors could find their payments 
     delayed or missed. Through its reach into all parts of 
     society, the disruption of Federal activities could spread 
     over the entire country.

  Mr. President, this comes from the CRS Issue Brief entitled ``The 
Debt Limit,'' updated August 10, 1995, by Philip D. Winters, Economics 
Division.
  So, Mr. President:

       Payments to State and local governments could stop. Federal 
     contractors could find 

[[Page S 14145]]
     their payments delayed or missed. Through its reach into all parts of 
     society--

  Not just here within the beltway; but in all parts of society.

     the disruption of Federal activities could spread over the 
     entire country.

  Mr. President, if that is not enough to rattle your teeth and curl 
your hair, it will certainly send a shiver of fear down the spine of 
every single American.
  But let us further consider the international consequences of a 
failure to increase the debt limit and subsequent default. Perhaps the 
distinguished--and he is a very distinguished Member of the other body 
for whom I have a great deal of respect--perhaps he does not care about 
the dire consequences that his words threaten for the individual 
American who helped to put him into office. After all, he will continue 
to be paid, as I will continue to be paid, and as every Member of this 
body and every Member of the other body, and the Chief Executive at the 
other end of the avenue will be paid, even if the Government shuts 
down--down, down.
  A failure to raise the debt limit in a timely manner could turn the 
international economy into a sea of quicksand. The U.S. dollar has been 
the backbone of international trade for most of this century. A default 
by the United States, that solid pillar of fiscal sobriety, would cause 
investor confidence in the dollar and U.S. government securities to 
plummet--plummet like Lucifer's fall into the lake of fire--affecting 
both domestic and international stock markets.
  But the glib threats made by that distinguished Member of the other 
body reportedly have already shaken the confidence of the investors 
that the United States depends upon to finance our debt, through 
Treasury bond sales. Already, in partial reaction to his words, the 
value of the dollar dropped by five percent before recovering somewhat. 
That drop in the value of the dollar will be insignificant in 
comparison to the effects of an actual default. Only 11 percent of the 
total value of publicly held U.S. Government debt securities are held 
directly by U.S. individuals. Some 22 percent are held by individuals 
and entities residing abroad. These foreign investors cannot be 
expected to understand the U.S. political system, and will simply 
invest elsewhere until this whole crisis blows over. But if the United 
States defaults, these investors will not be quick to come back. 
Indeed, domestic investors will be hard to win back, even if lured with 
higher interest rates, which cost the Government more. What used to be 
called ``government securities'' will become ``government 
insecurities'' for a long time to come. Is this what we want? Is this 
what you, the American people, want? I cannot believe that we do, or 
that you do. This is not in the best interests of the United States.
  This political brinkmanship--that is precisely what it is, political 
brinkmanship--this political brinkmanship which could so easily 
backfire can only result in the United States being the loser in the 
long term.
  A default would result in the United States facing permanently 
increased borrowing costs when the time comes to roll over our debt. 
Interest rates on those loans, which are secured with government bonds, 
would be raised, increasing the costs to the taxpayer. The Treasury 
Department estimates that every increase of one percentage point in 
interest rates would swell the deficit by $4.9 billion this year. So 
this political extortion game being perpetrated by a single member of 
the other body on the President and the American people could cost a 
minimum of $4.9 billion this year alone. And those interest rates would 
not be lowered again for some time. Is this any way to balance the 
budget? I thought that was the point of this painful process that we 
have been engaged in this year, balancing the budget. But with a few 
foolish, ill-considered, and arrogant words, this whole painful year of 
cuts to one important program after another can be wiped out, erased in 
one fell swoop. This is an outrage being perpetrated on the long-
suffering American public in order to satisfy the political ambitions 
and hubris of a single individual. For one party to put its own agenda 
ahead of the best interests of the American people is a complete 
abrogation of the trust of the American people.
  Mr. President, the sooner we all stop playing this game of chicken, 
the better off we will be. The sooner we stop talking about a ``train 
wreck'' on both ends of the avenue, the better off we will all be.
  I ask unanimous consent to have printed in the Record, Mr. President, 
articles from the New York Times and the Washington Post to which I 
have referred today.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

               [From the New York Times, Sept. 22, 1995]

    Gingrich Threatens U.S. Default If Clinton Won't Bend on Budget

                          (By David E. Sanger)

       Washington, Sept. 21.--House Speaker Newt Gingrich 
     threatened today to send the United States into default on 
     its debt for the first time in the nation's history, to force 
     the Clinton Administration to balance the budget on 
     Republican terms.
       His comments, a more extreme version of the hardball stance 
     frequently used in past budget showdowns, raised the specter 
     that the looming standoff may begin to rattle financial 
     markets around the world. Mr. Gingrich's remarks came in the 
     middle of a day in which the dollar plunged as much as 5 
     percent against major currencies before recovering slightly, 
     sending interest rates up sharply. [Page D13.] The Speaker's 
     statement appeared to be one of several factors that added to 
     the markets' unsettled condition.
       More broadly, Mr. Gingrich's speech to the Public 
     Securities Association, which represents traders in 
     Government debt, underscored the growing agitation and sense 
     of imminent collision in official Washington as both 
     Democrats and Republicans move toward a confrontation that 
     could shut the Government down this fall.
       Throughout the capital, there was a sense that the current 
     had quickened and the rumble of a great waterfall could be 
     heard close ahead. Angry disputes broke out on wildly varying 
     issues. Republicans threatened to block sending American 
     ground troops to enforce the Bosnia peace plan, agreed to 
     vast reductions in the protection for endangered species and 
     Federal lands, and pushed ahead with plans for radical 
     changes in Medicare and Medicaid. Democrats fumed and vowed 
     to do what they could to slow the legislation's breakneck 
     pace.
       Clearly part of Mr. Gingrich's autumn end-game strategy is 
     to force the White House to accept much of this agenda--many 
     parts of which President Clinton has vowed to veto--by 
     holding an increase in the Federal debt limit hostage. 
     Without an increase in the limit, the Government will be 
     unable to meet many of the payments due in November for 
     Social Security, military pay and interest on the Federal 
     Government's $4.9 trillion in debt.
       Such confrontation techniques have been used in the past. 
     But it was highly unusual for a high Government leader to 
     suggest, as Mr. Gingrich did today, that default on 
     Government payments was not beyond the pale.
       ``I don't care what the price is,'' he said in his speech. 
     ``I don't care if we have no executive offices and no bonds 
     for 60 days--not this time.''
       Without concessions from the White House across the board, 
     he said, there will not be any increase in the debt ceiling. 
     ``And we'll see how long they will last,'' he added.
       Administration officials were still trying tonight to 
     figure out how seriously to take Mr. Gingrich's comments. A 
     few months ago, the Speaker was forced to back away from his 
     off-the-cuff suggestions that the United States should 
     recognize Taiwan as an independent country, a step that would 
     lead to a breach with China.
       But Congress has little direct influence over foreign 
     policy. By contrast, its control of the Government's purse 
     strings gave added force to Mr. Gingrich's remarks. Indeed, 
     the Speaker's comments drew a quick and harshly worded 
     response from Treasury Secretary Robert E. Rubin. ``The 
     President won't be blackmailed by the use of the debt limit 
     as a negotiating lever,'' he said in a telephone interview 
     from Miami, where he was giving a speech tonight.
       ``It would be unprecedented and unwise for anyone in a 
     position of authority to dismiss the consequences of default 
     on the debt of the United States of America for the first 
     time in our history,'' he added. ``Even the appearance of a 
     risk of default can have adverse consequences, and a default 
     itself would increase the cost of debt for the United States 
     Government for many, many years to come. A sovereign 
     country's credit-worthiness is a precious asset not to be 
     sacrificed under any circumstances.''
       Mr. Rubin said he did not expect the United States to 
     default on any debt payment, a step that he has repeatedly 
     called ``unthinkable.'' But even a serious threat of a 
     disruption in payments can move the markets, and may send 
     borrowing costs soaring for the United States.
       The Treasury Department estimates that every increase of 
     one percentage point in interest rates would swell the budget 
     deficit by $4.9 billion this year. Republicans, however, 
     argued that interest rates should decline if the ultimate 
     outcome of the dispute between the parties is a big cut in 
     spending. They contend that any short-term blips in the 
     market--because of conflicts with the White House--would be 
     washed away by long-term benefits.

[[Page S 14146]]

       Aside from all the Sturm und Drang in Washington, the debt 
     limit debate has not yet had much effect, traders said. ``The 
     markets have not yet focused on it,'' said David M. Jones, 
     vice chairman of Aubrey G. Lanston & Company, which trades 
     Government bonds. ``One of the risks is that foreign 
     investors will not understand what is happening here. And if 
     they get nervous, they will just flee until it all sorts 
     out.''
       The issue will take on added urgency in the first five days 
     of November, when the Government must pay $50 billion in 
     Social Security benefits, Medicare and pay for active-duty 
     members of the military. On Nov. 15, about $25 billion of 
     interest payments are due.
       As Treasury officials concede, a number of financial tricks 
     are available to keep the Government afloat even if the 
     ceiling on debt is not raised. There are temporary debt 
     limits, emergency ``cash management sales'' to keep money 
     flowing in the coffers as short-term loans, and borrowing 
     against other Government reserves. But all of the steps come 
     with a cost, and none can go on for too long. Though the 
     overall Government debt is $4.9 trillion, the Treasury sells 
     about $2 trillion of debt securities every year because so 
     much of the Government's borrowings are ``rolled over'' into 
     new bonds.
       The debt limit exists as an institution in Washington 
     because the Constitution mandates that only Congress can 
     authorize borrowing. Before World War I, every bond issued by 
     the United States required separate Congressional approval. 
     Today, the raising of the debt ceiling essentially permits 
     the Treasury Secretary to make the day-to-day decisions 
     required to meet the Government's obligations.
                                                                    ____


               From the Washington Post, Sept. 22, 1995)

 Gingrich Vows No Retreat on Debt Ceiling Increase--I Don't Care What 
                       the Price Is, Speaker Says

                           (By Clay Chandler)

       House Speaker Newt Gingrich (R-Ga.) threatened yesterday to 
     take the government into default for the first time in 
     history unless President Clinton bows to Republican demands 
     for a balanced budget.
       ``I don't care what the price is,'' Gingrich declared in a 
     speech to the Public Securities Association, which represents 
     the nation's bond dealers. ``I don't care if we have no 
     executive offices and no bonds for 60 days--not this time.''
       Gingrich said that if Clinton refuses to sign a package of 
     tax and spending proposals reflecting Republican priorities, 
     he would block attempts to raise the government's credit 
     limit.
       ``I, the speaker, will not schedule'' a vote on an increase 
     in the debt limit' ``it will not come to the floor until we 
     have an agreement'' on balancing the budget according to the 
     Republican proposals, Gingrich told the securities group.
       Gingrich's pledge provoked sharp criticism from Clinton 
     administration officials. ``It would be unprecedented and 
     unwise for anyone in a position of authority to dismiss the 
     consequences of default,'' Treasury Secretary Robert E. Rubin 
     said last night. ``Even the appearance of a default can have 
     adverse consequences, and a default itself would increase the 
     cost of debt to the U.S. government for many, many years to 
     come.''
       ``The U.S. has never defaulted on its obligations and it is 
     extremely irresponsible to suggest that that might happen,'' 
     said White House budget director Alice M. Rivlin.
       The government is rapidly nearing the $4.9 trillion ceiling 
     on federal debt imposed by Congress in 1993. The government 
     will have difficulty paying $25 billion in interest 
     obligations due Nov. 15 unless Congress agrees to raise the 
     government's credit line so that it can borrow more money to 
     pay the bill, financial analysts estimate. Treasury officials 
     have warned that the government's cash crunch might come as 
     early as the end of October.
       The prospect that action to raise the debt limit could be 
     held hostage while Clinton and Congress slug it out over the 
     budget may have made some investors in global financial 
     markets nervous. Some administration officials suggested that 
     Gingrich's comments were responsible for yesterday's drop in 
     the value of the dollar and declines in stock and bond 
     prices, although Rubin would not draw that connection.
       On Wall Street, though, some analysts questioned the 
     significance of Gingrich's statements.
       Allen Sinai, chief global economist at Lehman Brothers Inc, 
     said the prospect of fiscal deadlock was cause for concern 
     among foreign investors, who ``don't completely understand 
     our ways and the pressures of the election year.'' But he 
     said U.S. analysts were likely to shrug off Gingrich's 
     remarks as political posturing.
       The prevailing view on Wall Street is that the two sides 
     eventually will strike a deal, said Carl Steen, an analyst at 
     the global economic consulting firm of Maria Fiorini Ramirez 
     Inc.: ``Somebody's going to blink. . . . They'll have to.''
       Steen said it is ``much more likely that the Senate 
     Republicans will say, `Okay, look, we're winning anyway. 
     Let's not push this thing too far.' ''
       Rubin also said, ``I do not believe there will be a 
     default.''
       But Gingrich warned against underestimating the commitment 
     of House Republicans: ``What we are saying to Clinton is; `Do 
     not assume that we will flinch, because we won't.' ''
       Gingrich's comments appeared to conflict with remarks made 
     on Sunday by House Budget Committee Chairman John R. Kasich 
     (R-Ohio). In an appearance on NBC's ``Meet the Press,'' 
     Kasich said House Republicans would not agree to a long-term 
     extension of the debt limit ``until we can show that there's 
     light at the end of the tunnel.
       But he also said, ``What we want to do is avoid a default 
     by the government of the United States. So if we can do a 
     short-term, temporary raising of the debt ceiling, that's not 
     inconsistent with the fact that on a long-term basis, we will 
     not raise it.''
       The prospect of breaching the debt ceiling is distinct from 
     a looming government shutdown, which could happen unless 
     Clinton and Congress come to terms on 13 separate spending 
     bills making their way through the legislature before Sept. 
     30, the end of this fiscal year. On Wednesday, Republican 
     leaders offered a temporary spending plan to carry the 
     government through until Nov. 13, but the White House said 
     many aspects of the resolution were unacceptable.
       Regarding the debt ceiling, Republicans argue that 
     temporary disruption in financial markets is a small price to 
     pay to ensure a balanced budget.
       But Rubin warned that ``a sovereign country's 
     creditworthiness is a precious asset that should not be 
     sacrificed under any circumstances.'' Clinton, he said, could 
     not be ``blackmailed'' into signing a budget deal.

  Mr. BYRD. Mr. President, I thank the Chair.
  I yield the floor.

                          ____________________