President Obama's Address to the Nation on the Debt Ceiling
President Obama Addresses the Nation on the Debt Ceiling*
(As Prepared for Delivery, July 1, 2011.)
My fellow Americans,
I want to speak to you today about a matter of the greatest national urgency. We face a crisis unique in our history. This threat comes not from a foreign foe or bloodthirsty terrorists, but is no less dangerous and insidious. No, this challenge to the American way of life comes entirely from within. And the damage it could cause is as catastrophic as it is unnecessary.
I am speaking about the looming deadline to raise the debt ceiling of the United States.
On or about August 2nd, the government of the United States will hit the $14.3 trillion limit on its debt. Never in our 235 year history has the United States of America defaulted on its financial obligations. Never has Congress failed to raise the debt ceiling in a timely manner. Never has Congress put the full faith and credit of the United States in jeopardy.
In an act of reckless and unprecedented partisanship, Republican leaders in both houses of Congress have promised to block the needed increase in the debt ceiling unless an ever-shifting - and escalating - series of demands are met. At a time when this nation is fighting two wars and slowly emerging from its deepest economic downturn since the Great Depression, only now are Republicans demanding trillions in spending cuts which would slow our recovery, cost hundreds of thousands of jobs, and undermine our social safety net. Republicans insist that any new revenue from any source, even by closing tax loopholes for the wealthiest individuals and most profitable corporation in America, is "off the table."
If those demands are unmet, the same Republican Party which drove this economy into a ditch will drive it off a cliff. That is irresponsible and unacceptable. Congress should pass the $2 trillion increase in the debt limit right now and with no preconditions.
You don't have to take my word for it or even Treasury Secretary Geithner's warning that default by the U.S. "would have a catastrophic economic impact that would be felt by every American." Back in January, Speaker Boehner himself explained, and I quote:
"That would be a financial disaster, not only for our country but for the worldwide economy. Remember, the American people on Election Day said, 'we want to cut spending and we want to create jobs.' And you can't create jobs if you default on the federal debt."
Economists, business leaders, think tanks and international financial bodies are in agreement regarding the dire consequences which would ensue. Mark Zandi, an economic adviser in 2008 to John McCain warned this week that failure to raise the debt ceiling by August 2nd would mean "I think we go into recession and my forecast would be blown out of the water." Bruce Josten of the U.S. Chamber of Commerce agreed that failure to pass legislation authorizing an increase in borrowing by Aug. 4 "would create uncertainty and fear, and threaten the credit rating of the United States." This week, 235 economists - including six Nobel Prize winners - signed an open letter to Congressional leaders urging them to raise the ceiling, and to do so "without attaching drastic and potentially dangerous reductions in federal spending." And the Standard & Poor's rating agency joined Moody's in warning that "the United States would immediately have its top-notch credit rating slashed to 'selective default' if it misses a debt payment on August 4."
Again, you don't have to take my word for it. Instead, listen to President Ronald Reagan from 1983:
This country now possesses the strongest credit in the world. The full consequences of a default -- or even the serious prospect of default -- by the United States are impossible and awesome to contemplate. Denigration of the full faith and credit of the United States would have substantial effects on the domestic financial markets and on the value of the dollar in exchange markets. The Nation can ill afford to allow such a result. The risks, the costs, the disruptions, and the incalculable damage lead me to but one conclusion: the Senate must pass this legislation before the Congress adjourns.
Ronald Reagan knew what he was talking about. After all, the national debt of the United States tripled during his tenure in the White House. And it would have been even worse had Reagan not raised taxes in seven of his eight years in office. As Alan Simpson, the co-chairman of my Commission on Fiscal Responsibility put it, "Ronald Reagan raised taxes 11 times in his administration -- I was here."
Now, some, like Speaker Boehner, have said that the early August deadline to increase the debt ceiling is "artificial." There are Republican members of both houses and GOP presidential candidates who have accused Treasury Secretary Geithner and this administration of "doomsday predictions that could only materialize at his own hand," of "scare tactics", and of "outright blatant lies." To those who claim that the debt limit need not be lifted and that the U.S simply "prioritize" interest payments on the debt, Secretary Geithner has been clear that "such uncertainty could cause the markets to doubt the full faith and credit of the United States." And the Republican opposition, or at least most of them, knows this to be true. To pretend otherwise, as Senator Jon Kyl is fond of saying, is "not intended to be a factual statement." And that is as unforgiveable as it is cynical.
That dangerous path would make it harder for the United States to sell future Treasury bonds and increase the cost of borrowing. As one of the major ratings agencies concluded in a recent report, failure to pay non-debt obligations "would signal sever financial distress and potentially imminent debt default," prompting the U.S. sovereign rating to be placed on "Rating Watch Negative." Just as damaging, because the United State currently borrows roughly 40 cents of every dollar in spends, successful Republican obstruction of the debt ceiling increase would mean immediate and catastrophic budget cuts starting next month.
Again, you don't have to take my word for it. A recent analysis by the Bipartisan Policy Center showed that the federal government would have to cut spending by 44% right away. That could mean Social Security recipients don't get their checks, our brave fighting men and women now in harm's way going unpaid and entire departments of the federal government being shuttered immediately. For my Republican opponents who claim creating jobs is their number one priority, it is worth heeding the BPC's warning that "On an annualized basis, the cut in spending alone is a 10 percent cut in GDP."
Think about that for a minute. Thousands of Americans could lose their jobs. Many thousands more struggling to make ends meet wouldn't be able to do so. Consumer spending would plummet and businesses would close their doors. All in the name of Republican partisan politics.
Now, it is true that the party which doesn't control the White House often votes against debt ceiling increases. After all, many of these requests are included as part other legislation. It's not unusual for Senators and Congressmen to cast "no" votes to send a message without endangering the full faith and credit of the United States. I know this, because in 2006 I did it myself. But while I regret that mistaken symbolic vote, neither I nor my Democratic colleagues then in the minority could have blocked the debt ceiling increase. We never had the votes.
But the Republican leadership in Congress now does. When President Bush sat in the Oval Office and presided over an almost doubling of the national debt, Republicans voted seven times to raise the debt limit. Just between June 2002 and September 2007, the current GOP leadership team of Senator McConnell, Senator Kyl, Speaker Boehner and Majority Leader Cantor voted a combined 19 times to boost the federal government's borrowing authority by $4 trillion. As I assumed the presidency at the height of the economic crisis in January 2009, the projected deficit was already $1.2 trillion and the debt ceiling set at $11.3 trillion.
Let me clear. The Republican Party which is now playing a dangerous game of chicken with Americans' economic futures over the past decade was largely responsible for the deficits they now decry.
In 2001, at a time of prosperity and budget surpluses, Republicans voted to cut taxes. Two years later, President Bush became the first modern president to cut taxes during war-time. During my predecessor's tenure, the U.S. national debt almost doubled, fueled by those Bush tax cuts of 2001 and 2003, the Medicare prescription drug plan and the unfunded wars in Iraq and Afghanistan. And Mitch McConnell and John Boehner voted for all of it because then, as their Utah colleague Orrin Hatch later put it, "It was standard practice not to pay for things."
Now that a Democratic President is in the White House, they've apparently had a change of heart.
But the stunning hypocrisy of my Republican friends hardly ends there. Senate Republicans are now demanding a vote on a balanced budget amendment co-sponsored by Senator Hatch. Its cap on federal spending at 18% of GDP would be not only be broken by every deficit reduction plan currently on the table, but would have a test failed by Ronald Reagan every year he was President. The Paul Ryan budget supported by 235 Republican representatives and 40 GOP Senators, a plan which adds $6 trillion to the federal debt over the decade, would break that law, too. And despite all of the Republican posturing, the Ryan budget they voted for would require the debt ceiling to be raised repeatedly in the years ahead. Again, if you don't believe me, just ask Speaker Boehner, who in April told a constituent meeting that not only would Republicans have to raise the debt ceiling, but added "and we're going to have to raise it again in the future."
It is true, as I have said on many occasions, that over time our budget deficits are not sustainable. That's why I created by executive order the Simpson-Bowles deficit reduction commission in the face of opposition from Minority Leader McConnell and Senate Republicans. That's why in April I proposed a budget blueprint that would trim the project debt by $4 trillion over the next 12 years. And that's why I asked Vice President Biden to lead bipartisan deficit reduction talks in order to seek common ground on budget savings with our Republican friends as part of a compromise to raise the debt ceiling by August 2nd. Together, by last week those bipartisan discussions identified $2.4 trillion in savings, $2 trillion from painful spending cuts to Medicare, Medicaid, student loans and other vital programs.
And yet the Republicans walked out. They took their ball and went home because they would not countenance raising a single dime of new tax revenue from any source. At a time when the total federal tax burden as a percentage of the U.S. economy is at its lowest in 60 years, Republicans said no to even $400 billion in new revenue over the next decade. At a time when income inequality is at its highest in 80 years, Republicans refuse to have the top 2% of taxpayers pay a little more, just as they did during the booming 1990's. Over the past decade, the 400 richest Americans saw their incomes double as their tax rates were halved while average family income fell. And over the next 10 years, the Bush tax cuts if made permanent will account for more of the nation's debt than Iraq, Afghanistan, TARP, the stimulus, and revenue lost to the recession combined.
So, to protect the pocketbooks of the richest individuals and most profitable corporations in America, the Republicans turned their backs on a debt ceiling deal for all Americans. Apparently, more tax breaks for corporate jets and subsidies for oil and gas companies are more important than the futures of American families.
Make no mistake: this debt ceiling crisis is unnecessary. And should it come to pass, history and the American people will judge the Republican Party harshly for having fabricated it. They held the debt ceiling hostage, demanding ten-year budget savings as large as large the increase we requested. We've met that demand and still they say no. Minority Leader McConnell says the small tax increases we've proposed are "politically impossible." Not only is more tax revenue politically possible, it's absolutely required. And he knows it. Mitch McConnell, John Boehner and Jon Kyl know common sense tax code changes supported by the American people aren't silly talking points about "poison pills" and "bombing the moon." To pretend otherwise is an abdication, a true failure of leadership.
After the tragic terrorist attacks of September 11, 2001, Americans learned that one of Osama Bin Laden's goals was to undermine the U.S. economy. Mercifully, his dark vision of economic sabotage lies with him at the bottom of the Indian Ocean. He could not and did not succeed. But now, President Bush's former Treasury Paul O'Neill warned us, another group threatens to wreak havoc on the American economy and standard of living. As he described his Republican colleagues:
"The people who are threatening not to pass the debt ceiling are our version of al Qaeda terrorists. Really. They're really putting our whole society at risk by threatening to round up 50 percent of the members of the Congress, who are loony, who would put our credit at risk."
That cannot and must not happen.
May our Republican friends come to their senses in time. And may God bless the United States of America.
* This address, of course, never happened. But it should have happened a long time ago.