[Congressional Record Volume 152, Number 93 (Monday, July 17, 2006)]
[House]
[Pages H5251-H5252]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                     IS THE UNITED STATES BANKRUPT?

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentlewoman from Ohio (Ms. Kaptur) is recognized for 5 minutes.
  Ms. KAPTUR. Mr. Speaker, there are plenty of signs that the United 
States economy is not working well. One of the signs is our national 
debt. The latest figures show we are somewhere ever $8 trillion in the 
hole, and every day the hole gets deeper. You would think someone here 
in Washington would pay attention.
  Back in the year of 2000, as a result of major decisions made during 
the 1990s by the Congress, by then President Clinton, we were able to 
balance the annual budget and were actually paying down this enormous 
debt, the accumulated debt of the country.
  So things do not look too good there, and the United States has to 
cover those borrowings by borrowing from foreign interests. We know 
nearly half of U.S. debt securities are now purchased by foreign 
interests, and the United States is in hock, having to pay every year 
hundreds of billions of dollars in interest, interest to those foreign 
holders of our debt, interest we could be spending here at home; 
dollars we could be spending here inside the borders of the United 
States, rather than to those who are loaning us the money.
  Another sign of our predicament is this, that is, the monthly and 
annual trade deficits of our country, where more imports are coming 
into our Nation, more and more and more every month, every day, every 
year, than we export out.
  It is not that we are not exporting things. We are. But we are 
importing vastly more than we are exporting. In fact, the latest 
figures, compiled by the U.S. Census Bureau, indicate that in the month 
of May, the last month for which we have final figures, our goods and 
services deficit went up another $63.8 billion in 1 month. In 1 month.
  That means, if you look at these monthly figures of our trade 
deficit, more imports coming in here than exports going out, in January 
of this year, they surpassed the debt, the trade debt from last year, 
in February, in March, in April, and then in May. May was worse than 
April. Without question, this year will go down as one in which the 
United States will have amassed the largest trade deficit in history.
  We are literally in uncharted waters, because when these goods are 
purchased in our country, those dollars that are then forked over for 
those goods go somewhere else. Go somewhere else. And then those 
countries, take China, for example, or Korea, any of the nations with 
whom, or Japan with whom we have huge trade deficits, have those 
dollars to spend. We do not have them to spend. They do.
  So they are literally taking our earned assets, and they are trading 
them internationally. In fact, the State of Indiana just did something 
incredible. They made a decision to lease out the Indiana Turnpike to 
foreign interests. This is unbelievable.
  This is unbelievable. So the poor State of Indiana, the taxpayers of 
that State that had paid off the bonds on the turnpike over 30 years 
ago are now in hock to Spanish and Australian investors for the next 99 
years. Unbelievable.
  It is like a fire sale. Chicago Skyway did the same thing. Leasing 
out a public asset to foreign interests. And then we not only owe them 
the annual interest payments; but our children and our grandchildren, 
you can just see the pieces of America being taken away because we are 
not paying our own way.
  There was an article in a London paper, the Telegraph, the headline 
of which is, ``U.S. could be going bankrupt.'' And it is really talking 
about at what point do you officially declare bankruptcy. And it says, 
the United States is heading for bankruptcy, and research by Professor 
Laurence Kotlikoff for the Federal Reserve Bank of St. Louis said the 
United States is indeed bankrupt insofar as it will be unable to pay 
its creditors, who in this context are current and future generations 
to whom it has explicitly or implicitly promised future net payments of 
various kinds.
  Certainly pension benefits, certainly health care benefits, all of 
those endangered because the Nation is in hock. We owe others. What is 
interesting about that Indiana turnpike deal is that the tolls have 
been doubled now. So the foreign interests to which the Indiana 
turnpike was leased out have now doubled the costs on the U.S. 
consumer. We do not have control of our own future until we get the 
trade accounts and our budget accounts in order.
  Certainly the President ought to submit a balanced budget. Certainly 
this Congress ought to pass one. That has not happened during the Bush 
administration.

                [From the Telegraph (UK), July 14, 2006]

                      US `Could be Going Bankrupt'

                  (By Edmund Conway, Economics Editor)

       The United States is heading for bankruptcy, according to 
     an extraordinary paper published by one of the key members of 
     the country's central bank.
       A ballooning budget deficit and a pensions and welfare 
     timebomb could send the economic superpower into insolvency, 
     according to research by Professor Laurence Kotlikoff for the 
     Federal Reserve Bank of St. Louis, a leading constituent of 
     the U.S. Federal Reserve.
       Prof. Kotlikoff said that, by some measures, the U.S. is 
     already bankrupt. ``To paraphrase the Oxford English 
     Dictionary, is the United States at the end of its resources, 
     exhausted, stripped bare, destitute, bereft, wanting in 
     property, or wrecked in consequence of failure to pay its 
     creditors,'' he asked.
       According to his central analysis, ``the U.S. government 
     is, indeed, bankrupt, insofar as it will be unable to pay its 
     creditors, who, in this context, are current and future 
     generations to whom it has explicitly or implicitly promised 
     future net payments of various kinds''.
       The budget deficit in the U.S. is not massive. The Bush 
     administration this week cut its forecasts for the fiscal 
     shortfall this year by almost a third, saying it will come in 
     at 2.3pc of gross domestic product. This is smaller than most 
     European countries--including the UK--which have deficits 
     north of 3pc of GDP.
       Prof. Kotlikoff, who teaches at Boston University, says: 
     ``The proper way to consider a country's solvency is to 
     examine the lifetime fiscal burdens facing current and future 
     generations. If these burdens exceed the resources of those 
     generations, get close to doing so, or simply get so high as 
     to preclude their full collection, the country's policy will 
     be unsustainable and can constitute or lead to national 
     bankruptcy.
       ``Does the United States fit this bill? No one knows for 
     sure, but there are strong reasons to believe the United 
     States may be going broke.''
       Experts have calculated that the country's long-term 
     ``fiscal gap'' between all future government spending and all 
     future receipts will widen immensely as the Baby Boomer 
     generation retires, and as the amount the state will have to 
     spend on healthcare and pensions soars. The total fiscal gap 
     could be an almost incomprehensible $65.9 trillion, according 
     to a study by Professors Gokhale and Smetters.
       The figure is massive because President George W. Bush has 
     made major tax cuts in recent years, and because the bill for 
     Medicare, which provides health insurance for the elderly, 
     and Medicaid, which does likewise for the poor, will increase 
     greatly due to demographics.
       Prof. Kotlikoff said: ``This figure is more than five times 
     U.S. GDP and almost twice the size of national wealth. One 
     way to wrap one's head around $65.9 trillion is to ask what 
     fiscal adjustments are needed to eliminate this red hole. The 
     answers are terrifying. One solution is an immediate and 
     permanent doubling of personal and corporate income taxes. 
     Another is an immediate and permanent two-thirds cut in 
     Social Security and Medicare benefits. A third alternative,

[[Page H5252]]

     were it feasible, would be to immediately and permanently cut 
     all federal discretionary spending by 143pc.''
       The scenario has serious implications for the dollar. If 
     investors lose confidence in the U.S.'s future, and suspect 
     the country may at some point allow inflation to erode away 
     its debts, they may reduce their holdings of U.S. Treasury 
     bonds.
       Prof. Kotlikoff said: ``The United States has experienced 
     high rates of inflation in the past and appears to be running 
     the same type of fiscal policies that engendered 
     hyperinflations in 20 countries over the past century.''
       Paul Ashworth, of Capital Economics, was more sanguine 
     about the coming retirement of the Baby Boomer generation. 
     ``For a start, the expected deterioration in the Federal 
     budget owes more to rising per capita spending on health care 
     than to changing demographics,'' he said.
       ``This can be contained if the political will is there. 
     Similarly, the expected increase in social security spending 
     can be controlled by reducing the growth rate of benefits. 
     Expecting a fix now is probably asking too much of short-
     sighted politicians who have no incentives to do so. But a 
     fix, or at least a succession of patches, will come when the 
     problem becomes more pressing.''

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