[Congressional Record Volume 155, Number 123 (Friday, August 7, 2009)]
[Senate]
[Pages S9073-S9074]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                              THE DEFICIT

  Mr. SESSIONS. Mr. President, before we leave for our August recess, I 
think it is good to maintain our watch on what is happening in the 
financial markets. I have reported on these matters several times this 
year because I think it is something we have to talk about. The reason 
we have to talk about it is because the United States is borrowing more 
money this year than any year in the history of the American Republic. 
It dwarfs anything we have ever done before, and it is an action that 
has consequences. We cannot borrow dramatically without having 
consequences occur, just as they do in our families. If your family 
goes more into debt, you are burdened with high interest rate payments 
that produce nothing but are monies you expend because you borrowed 
money. That is what interest is. It does not do you any good. It is a 
painful thing for no immediate benefit. The benefit comes when you 
borrowed it and bought something with it, but in the long run you carry 
that interest unless you pay the debt off in the future.

  The problem this country has is that according to the President's own 
budget, in the next 10 years we have no plans whatsoever to pay down 
any debt. In fact, the debt is surging in the outyears. Growing the 
deficit for each annual accounting will increase in the outyears. So we 
are in an unsustainable rate of spending in America. We have heard 
those phrases, and ``unsustainable'' means just that: We can't keep it 
up in this fashion.
  I will put this chart up that is not disputed by anybody who has been 
involved in the process. It represents what the Congressional Budget 
Office--a nonpartisan group, but in truth it is hired by the Democratic 
majority here in the Congress, in the Senate--has scored the 
President's budget and what it will mean for us in terms of debt over 
the next 10 years. It is a 10-year budget, and we are supposed to look 
out into those years.
  In 2008, the total debt in America was $5.8 trillion. From the 
beginning of the American Republic until 2008, we had accumulated $5.8 
trillion in debt. That is a lot of money; more than we needed to have 
been carrying as a debt. President Bush was criticized for having 
several deficits, one over $400 billion, and another one either at or 
around $400 billion. Other years were less: $100 billion, $160 billion, 
something like that. But he was criticized for that because it helped 
cause the debt to go up. But look what the Congressional Budget Office 
says we are going to be facing 5 years from now in 2013: a doubling of 
that debt to $11.8 trillion. Ten years from now it will triple to $17 
trillion. The debt will increase in the out years. President Bush was 
rightly criticized for having added a $450 billion deficit in 1 year. 
We will not see in the next 10 years, according to the Congressional 
Budget Office, a single deficit year that low. The lowest they project 
is that it would be $600 billion plus. In the tenth year, out here in 
2019, it is projected the deficit will be $1.1 trillion. This year, the 
deficit is projected to be $1.8 trillion. We will soon know. Some say 
it will be $2 trillion; $1 trillion, of course, is one thousand billion 
dollars--a lot of money. It has consequences. Where do you get this 
money?
  Where do we get the extra $2 trillion we are spending today that we 
don't have? Where do we get it? Well, we go into the marketplace and we 
ask people to buy Treasury bills and loan us the money. It is basically 
a note. They give us their money and we give them a promise to pay, 
plus interest. If you don't have any plan to pay down those debts, and 
we don't--indeed, we continue to project a surge in borrowing even in 
the tenth year, with no recession being projected in this next 10 
years, so it is a grim prospect to pay this kind of interest.
  This chart deals with the interest payment. People think: Well, 
somehow we can borrow and it doesn't hurt us. That is not so. If you 
borrow, you have to pay interest on it. This country pays interest 
today on the debt of $5.8 trillion. We are sort of fortunate because in 
this economic slowdown interest rates are low, but they are not going 
to stay low, and that is the problem. Not only that, the size of the 
debt is increasing.
  So in 2009, it is projected that the interest on our debt will be 
$170 billion. Well, the entire Federal education budget--what, $100 
billion--the entire Federal highway budget prior to this stimulus 
package, at least, was $40 billion. So $170 billion goes out in 
interest to people all over the world and in the United States who have 
bought Treasury bills, including foreign countries such as the Arab 
countries who have so much of the American dollars because we buy their 
oil, and China, we buy their products and they have American dollars, 
and they have been buying our Treasury bills.
  But look what happens over the 10-year window. This is according to 
the Congressional Budget Office--a fair, objective analysis of what we 
are looking at. Let's take the red numbers. This is what we would be 
paying out annually in interest. It goes up--by 2019, the interest we 
would pay at the originally projected rate of interest CBO used--to 
$800 billion in 1 year in interest we pay on the debt.
  People are getting worried the interest rates are going to go up 
because we are borrowing so much money and people are going to be 
afraid that the dollar will be devalued, and our currency will be 
inflated. Therefore, they won't get as much return because they will be 
cheated because the dollars they get back from the United States in 
terms of interest aren't the same valuable dollars they were 
originally. The fundamental thing that is working up here in people's 
minds is that the interest rates could go up. If we use the Blue Chip 
economics forecast, the total payment in interest could be $865 
billion. If it goes up higher to the rates we saw in the 1980s, it 
could be $1.3 trillion. That is just interest, in 1 year, that we would 
have to pay. Our total budget today is about $3 trillion. That would be 
more than a third of the budget.
  I don't think the Members of this Congress understand the seriousness 
of this problem, because look at the bills that go through here. I am a 
big supporter of farm programs. I supported farm bills year after year, 
but I couldn't vote for the one this year. It had a 11-percent increase 
in discretionary spending under the agriculture bill--11 percent. You 
know, at 7 percent return, your money doubles in 10 years; at 11 
percent, the agriculture budget will double in several years.
  At a time when we are running up unprecedented debts, we have an 11-
percent increase there. It is difficult for me to comprehend. I don't 
think we are serious about it. Now the House has put in three airplanes 
so Members of the Congress can take trips with them, presumably. 
Somebody somewhere needs to be asking: Where are we going to get this 
money? Every dime of it will be borrowed. The $800 billion we

[[Page S9074]]

passed earlier this year that was supposed to stimulate the economy, 
keep the unemployment rate from going up, and cause economic growth to 
occur, was borrowed. We didn't have that money. The first automobile 
clunker bill, $1 billion, was borrowed on top of that. It wasn't even 
paid for out of the stimulus bill. It was new billion dollars. Then the 
new clunker bill that passed here last night in the House, they said: 
Well, it was going to come out of the stimulus package and, therefore, 
it wouldn't add to the debt because we have already authorized this 
stimulus money to be spent, but that is not what the House leadership 
said. They promised they wouldn't reduce any of the spending that was 
provided for in the $800 billion stimulus package. Only 11 percent of 
the discretionary funds will be spent by October 1. They wouldn't take 
the money out of that to fund the clunker program. They promised 
without any equivocation that they would replenish that to borrow 
money. They are going to borrow that money so they don't have to reduce 
any of this spending in the stimulus package.
  The Treasury issued a record amount of debt this past year--an 
unbelievable amount, actually. The Treasury Department said Wednesday 
it is going to sell a record $75 billion in Treasury bills just next 
week so we can pay all of these obligations, we have appropriated the 
money for. We don't have the money, so we have to borrow it. In 
particular, the Treasury officials need to ensure that demand from 
China--that is, China's purchasing of our Treasury bills--doesn't fall 
off. We want them to keep buying. There are several problems, however. 
China doesn't have as much money as they did because their sales are 
not going as they were, and they are using some of their surplus money 
to stimulate their own economy. So they are not going to have as much 
money to buy Treasury bills as they did, frankly. But at any rate, 
demand from China, the largest holder of U.S. Government debt, is 
shaky. We put out the Treasury bills by auction at an interest rate and 
people bid for them, basically, and the government has to raise the 
rate high enough to get people to give them the money so we can spend 
in Congress.
  According to yesterday's Wall Street Journal, last week's auctions of 
fixed-rate Treasury notes saw lukewarm demand from China and other 
investors. They are getting worried. Chinese officials had indicated 
they want inflation-protected securities, especially as the U.S. 
economy starts to recover. Inflation-protected securities. That is the 
TIPS. Right now they are not paying much interest. It is pretty low 
interest. But if you have a TIP, inflation-protected securities, and 
the interest rate goes up, then you get paid more. The return on your 
Treasury bill goes up. It is not fixed.
  ``Inflation is the No. 1 worry,'' said Mark Chandler, global head of 
currency strategy for Brown Brothers Harriman & Company: ``This is the 
government saying, `We will take that inflation risk away from you.' ''
  That is what a TIP does. It says, Don't worry about inflation; if the 
inflation goes up, we will pay you greater interest on the Treasury 
bill you buy.
  And the spread--the difference between the 10-year TIPS--inflation-
protected securities--and the regular 10-year Treasury note has risen 
from near zero at the beginning of this year to about 2 percent today. 
That means that one can get a 2-percent better rate by buying regular 
Treasuries, 10-year Treasury notes, but people still want TIPS. People 
with money want TIPS. Why? Because they are afraid in the next 10 years 
we are going to have a surge of inflation and a 3.7-percent 10-year 
Treasury bill. Well, they would rather have a 1.7-percent TIPS than get 
2 more percent on the U.S. Treasury bill.
  According to yesterday's Wall Street Journal, officials from the 
United States and China discussed TIPS issuance in high-level talks 
last week. U.S. officials assured their Chinese counterparts that they 
remain committed to TIPS sales, according to a person with knowledge of 
the discussions. China has accumulated more than $2 trillion in foreign 
exchange reserves and has invested about $800 billion in the U.S. 
Treasury. Meanwhile, interest rates on regular 10-year Treasuries have 
increased from 2.4 percent to 3.75 percent this year, an increase of 
over 50-percent.
  So the interest rates on the 10-year Treasury has increased over 50 
percent since January. Why? Because people are not willing to give the 
government money at the lower 2.4 percent rate because even though we 
are in a recession and interest rates are very low, they know with this 
kind of debt, this kind of future debt that the United States is 
facing, we are going to have a tremendous temptation to inflate the 
currency. And we are going to have that pressure because one way to 
beat your debt, of course, is to pay it back in dollars not worth as 
much as the dollar the person loaned. If they loan you a dollar today, 
and the dollar drops 20 percent, you can pay them back with dollars 
worth 80 cents rather than a dollar. That is a pretty good deal, if you 
can get away with it.

  People are smart and they see this coming. They are demanding higher 
interest rates now, or they won't loan us the money--like any smart 
businessperson would. I say to my colleagues you don't get something 
for nothing. There is no free lunch. You cannot run up this kind of 
debt without consequences for the young people of this country in the 
years to come. They are going to be carrying a $800 billion-a-year 
annual interest rate in 10 years. Most likely, this number will be 
higher than $800 billion a year, whereas our generation today is 
carrying a $170 billion a year annual interest payment. I do not 
believe we have to do that to help this economy come out of recession. 
In fact, when you talk to people who are involved in the American 
financial sector, the biggest worry they have is interest and the debt. 
For everything else, they can see a way the U.S. economy will come out 
of it. If we burden ourselves with more debt than we can sustain--and 
we are clearly heading in that direction--long-term investors are 
worried. They don't see this coming out right. That is why they say it 
is not sustainable.
  I wished to share these remarks before we recess for August. I don't 
think it should be forgotten. We have a responsibility to see that 
every dollar we spend produces something of value. While it can also 
have a stimulative effect, it needs to produce something of value; it 
cannot just be thrown away. We need to look for every possible way to 
contain this growth in spending. It is unacceptable and it cannot 
continue. Somehow, some way, Congress has to get the message; and I 
don't think we have gotten it. I don't think we understand that 
millions of people are losing their jobs. People who used to have 
overtime are not getting it today. Many who were working full time are 
working part time today. Families who used to have two wage earners now 
only have one.
  This is serious. We are going to have to recognize we cannot spend 
our way out of it. We cannot borrow our way to prosperity, as one 
Alabamian told me at a townhall meeting.
  Mr. President, I yield the floor.

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