[Congressional Record (Bound Edition), Volume 150 (2004), Part 19]
[Extensions of Remarks]
[Pages 25414-25415]
[From the U.S. Government Publishing Office, www.gpo.gov]




                    REPUBLICAN FISCAL MISMANAGEMENT

                                 ______
                                 

                          HON. JAMES P. MORAN

                              of virginia

                    in the house of representatives

                       Friday, November 19, 2004

  Mr. MORAN of Virginia. Mr. Speaker, this Republican leadership has 
presided over a historical fiscal reversal from record surpluses to now 
record deficits. Their lack of fiscal discipline has placed our economy 
in a precarious position and straight jacketed future policy options.
  The most troubling aspect of this policy is that they are giving the 
current generation, especially the most wealthy, a free lunch while 
they run up debts that they have consciously decided to pass on to our 
children. At the current debt level, each newborn child inherits 
$85,000 in interest on the debt. This so-called ``baby-tax'' will 
rapidly increase unless we restore some sanity to our budgetary 
policies and practices.
  The lack of a surplus makes it even more difficult to solve the 
impending bankruptcy of Social Security and Medicare, or even to enact 
a Republican tax reform agenda.


                    Pattern of Fiscal Mismanagement

  Time and time again, this leadership has chosen to disregard its 
fiscal responsibilities and ignore signs of impending fiscal crisis in 
the hope that the problem will fix itself, or disappear altogether.
  Clearly a policy of avoidance doesn't work, and it's certainly not 
what the American people expect from its elected leaders. You can't 
simply stick your head in the sand and expect market forces to balance 
the national budget. That's the Congress' responsibility.
  I can cite example after example illustrating how this leadership 
cares little about our Nation's fiscal state of affairs.
  The pay-as-you-go rule, PAYGO, the budget enforcement mechanism 
devised to reign in deficits, worked very effectively in the nineties 
to bring the budget into balance and restore surpluses.
  After PAYGO expired, the House leadership squandered multiple 
opportunities to renew it and refused to take action. It's no 
coincidence that we've seen record high deficits in the last 2 years.
  And now this Congress is backed into a corner and forced to take 
action to raise the debt ceiling for the third time in 3 years, another 
record.


      Worrisome Signs in the International Currency & Debt Markets

  The Bush administration and leadership in the House say deficits 
don't matter, but in truth they do matter, and we are now staring 
crisis in the face. There is near unanimity among economists that our 
Nation's fiscal imbalance could put us in real economic peril.
  In a study published just 2 weeks ago, economists Maurice Obstfeld 
and Kenneth Rogoff warned of ``current account collapse'' sparked by 
withdrawal of funds from international investors. They said that this 
issue should be ``problem number one on the President's international 
financial agenda.''
  Alan Greenspan's comments today confirmed brewing concerns about the 
weakening dollar and decreasing appetite among international investors 
for ``adding to [their] dollar balances.''
  We must heed these warnings and get our financial house in order or 
the delicate house of cards constructed by this Administration and 
Congressional leadership will come tumbling to the ground, and all 
Americans will pay a hefty price.
  Already there are signs that the dollar's value is declining and 
other currencies, primarily the Euro, are slowly replacing the dollar 
as the favored currency among international investors. This week, the 
dollar reached an all time low against the Euro--one Euro is now worth 
$1.30.
  Our nation needs to borrow around $2 billion a day, and 92 percent of 
debt securities sold over the last 4 years have gone to foreign 
countries. So obviously we rely heavily on foreign investment. The 
question is what happens if those countries abandon the dollar for 
another currency?
  If foreign governments like China decide to divest its U.S. currency 
holdings; the consequences would be serious, especially considering the 
massive purchases by the Chinese Central Bank ever the last few years. 
In 2003, dollar purchases by foreign central banks were $617 billion, 
compared to $352 billion the year before. Total reserves of the 
emerging Asian countries rose by more than $350 billion between March 
2003 and March 2004. Japan and China alone currently hold close to a 
trillion dollars of U.S. debt.
  Unlike in years past, we cannot assume that no other currency comes 
close to rivaling the dollar's strength. The emergence of the Euro 
substantially changes the international currency market, because, 
despite the soundness and stability of the dollar, the Euro has become 
a true alternative, backed by reasonably sound monetary policies.
  So the largest holders of foreign currencies in Asia could change 
their preference purely on the basis of financial, not political 
considerations.
  This scenario is unraveling right now. Asian countries believe that 
our exceedingly high deficits are untenable and threaten the American 
economy. They worry that more buying could in turn destabilize their 
own economy.
  Consequently, we increasingly find ourselves in the precarious 
position of having to convince these foreign governments to continue 
their purchasing.


                               Conclusion

  The leadership has apparently backed away from its initial plan to 
include the debt ceiling increase in an omnibus appropriations bill. 
Hiding the debt ceiling increase in a larger bill would be a mistake 
because it would undermine the purpose of the statutory requirement--
accountability. Members of Congress should explain their decision to 
increase the national debt. The American people deserve to know what's 
going on.
  The Republicans succeeded in framing the recent election in terms of 
cultural, moral and religious values. Democrats believe that balancing 
the Nation's books is a moral issue. If the Republican leadership 
believes that the American people will continue to be distracted by 
``moral'' wedge issues while they run up debts that will bankrupt the 
Social Security and Medicare trust funds and significantly harm the 
quality of life of all Americans, they are seriously mistaken.
  As Democrats step up efforts to fully inform the American people 
about the magnitude of Republican fiscal mismanagement, I am confident 
that most will put aside their cultural and religious differences in 
favor of an overriding value: economic security.
  Despite larger working majorities in the House and Senate, I do not 
plan to subordinate my views and positions to accommodate this 
temporarily dominant majority. There will still be opportunities in the 
109th Congress to advance an alternative and more fiscally responsible 
budget. I will continue to engage in this crucial issue and look 
forward to receiving your views on this and other matters in the 
future.

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