U.S Credit Rating

Floor Speech

Mr. DURBIN. Madam President, this morning's Wall Street Journal has a headline which I hope America will pay close attention to: ``Raters put U.S. on notice.'' The United States of America has a credit rating, much as we do as individuals, businesses, and families. The credit rating of the United States is AAA, the very best.

What does it mean? It means two things. First, that those who do business with America think it is the best place to do business--the most reliable economy, the rule of law, transparency. It says good things about America. It translates into the lowest interest rates charged when America borrows money. That is a good thing because we borrow a lot of money.

This AAA rating, of course, is something that is not guaranteed. You have to work for it. Countries around the world now, particularly in Europe, are struggling and failing economically, some in worse shape than others. In the Irish Times yesterday they referred to what they called the ``PIGS''. I had never seen that term before. It refers to Portugal, Ireland, Greece, and Spain. They said this week Italy was joining the PIGS, the seventh largest economy in the world, roiling in euro debt, being called on to transform and change their economies and their government to deal with their national debt.

It is a tough time in the European Union, and the jury is still out about any one of those countries and how this will end. The United States is not in that situation, thank goodness. Our economy has its problems. We know that: 9.2 percent of our workforce is unemployed, a situation where many small businesses are still struggling, where families struggle, many of them paycheck to paycheck, to get by. But still, the fact that we have to guard our borders to keep people from coming here is an indication of what America's promise means to the rest of the world.

This notice from the rating agencies that now we are on a watch, a credit watch, as to whether our AAA credit rating in America should be diminished is serious. Secretary of Treasury Tim Geithner meets with us when we go down to the White House to talk about the current negotiation over the debt ceiling. What he told us yesterday was that this rating is the product of two things: First, there is no clear path available to indicate that Congress is able to extend the debt ceiling of the United States on August 2; and, secondly, there is no clear indication that Congress and the President are working together to deal with our national deficit. Because of that, Secretary Geithner said this rating has come out, and that is the reality of what we face.

First, a word about the debt ceiling. What is it? Most people do not know, and it is understandable because it does not get much attention, although it has been around a long time. The debt ceiling was created in 1939. It was created because Congress decided they did not want to vote every time we issued a national bond or some other note. We would rather give our Department of Treasury the authority to issue debt obligations up to a certain dollar level. As the debt of the United States increased and the need to borrow increased, that level increased as well. Between 1993 and today, we have extended the debt ceiling in America 89 times, 55 times under Republican Presidents, 34 times under Democratic Presidents, and virtually without notice. Who is the No. 1 President in the history of the United States to extend the debt ceiling and to increase America's debt? Ronald Reagan, far and away. He did it 18 times, and during the course of his 8 years in office, raised the national debt ceiling by 199 percent.

Then you go to the next President, who raised it 90 percent in debt, President George W. Bush. So it is a bipartisan undertaking. What it means is that when needed, the Congress of the United States authorizes the President to borrow the money necessary to cover what we have spent in appropriations from Congress, in our entitlement and mandatory programs--Social Security, Medicare, and the like--we have to borrow money.

In fact, we borrow 40 cents for every $1 we spend in Washington for everything--40 cents for every $1. So we are looking to the people to loan us money on a regular basis. The No. 1 one creditor of the United States, among countries, is China--ironic--our No. 1 creditor, our No. 1 competitor. An interesting relationship.

The debt ceiling comes due August 2. As it has been routinely extended time and time again, this time is different. The House Republican leadership has said: We refuse to vote to extend the debt ceiling of the United States unless we see deficit reduction. What would happen if we did not extend the debt ceiling?

What would happen if you did not make your mortgage payment? I think I would know what would happen to Loretta and me in Springfield, IL. We might hear from our bank, and our bank might say: Mr. Durbin, you know, the month of July has come and gone and you did not pay your mortgage on your home in Springfield. What is up?

If you said: I am just not going to pay it this month, they would say: That is not what you signed up for. You signed up to meet your obligation. So if you do not pay it, you face foreclosure.

But in the meantime, what have you done, what my family would have done under those circumstances, is to jeopardize our credit rating. The next time my family would want to borrow money for a home, the bank would say: I am not sure you are such a good risk. You have missed your mortgage payment or, if they loaned us money, it would be at a higher interest rate.

That is the reality of what happens if you do not extend the debt ceiling. This situation when it comes to America is grave. It is not just about America paying a higher interest rate to borrow money, it is about the interest rate across our country being affected. Down at the Federal Reserve, Ben Bernanke and the Federal Reserve Board of Governors are doing everything in their power to keep interest rates low because we want businesses to expand, to be profitable, and to hire people.

When interest rate costs go up, businesses find it more expensive to borrow and borrow less. Individual families find it more difficult to buy the car, the home, the appliances they might need. So with interest rates going up as a result of our failure to extend the debt ceiling, we are doing exactly the opposite of what the American economy needs today. That is why it is so serious. In fact, it could be catastrophic. In a few minutes, we are going to hear from Treasury Secretary Tim Geithner, who is going to come before us and talk about the impact of failure to extend the debt ceiling.

What we are doing in the White House today is negotiating with leaders of Congress, Democrats and Republicans, and the President to extend the debt ceiling because many of us believe it would be disastrous. If we would default on our debt, we call into question the full faith and credit of the United States of America. At the end of the day, we would find ourselves with a self-inflicted wound to the American economy: raising interest rates and making it more difficult to come out of this recession.

We are trying to reach an agreement, and it has been hard going. We have had five face-to-face meetings in the White House so far. Yesterday's was reported in the news as contentious, and it was. The President has said he believes our first obligation is to get the American economy back on track and Americans back to work. We should not do anything in the course of our business that would make that more difficult. I could not agree with him more.

The highest priority in America is putting Americans back to work in good-paying jobs right here at home. The highest priority in America is allowing small businesses to expand, to do more business, and hire more people. That is what we ought to be about. If we fail to extend the debt ceiling, it makes it more difficult to reach those goals.

I listened as Presidential candidates of the other party in Iowa say: It does not matter. Default on the debt. Let's see what happens. That is the most--let me think of a good word here--naive comment on our economy I can imagine. The people who are making it have no business aspiring to the highest office in the land.

We need to accept this responsibility and deal with this debt ceiling honestly. We need to extend it so there is no question about the credit rating--the full faith and credit of the United States of America.

Secondly, we need to get serious about this deficit. I know the occupant of the chair has strong personal feelings about this. She has introduced legislation dealing with this deficit and how we can cope with it in the Senate and in the House. I have been part of the President's deficit commission. I have been engaged with colleagues of both political parties on how to take it further. Our goal is, very simply stated, I believe and those who are engaged in these conversations believe we can reduce the debt of the United States by up to $4 trillion over the next 10 years. We can do it in a sensible, thoughtful way, with shared sacrifice across America.

We need to put everything--and I underline the word ``everything''--on the table. Spending programs are the start. We should go to them and root out what we consider to be wasteful, unnecessary, fraudulent, and abusive practices in our spending, whether it is in the Department of Defense or any other agency of government.

When the Department of Defense came before the Bowles-Simpson commission, we asked them how many private contractors work for the Department of Defense.

Their answer: We have no idea.

We said: Give us a range.

They said: The range is somewhere between 1 million and 9 million people working for the Department of Defense--maybe.

That is unacceptable. We can do better. Our brave men and women in uniform deserve better, and so do the American taxpayers.

We must put all spending on the table, reducing spending where we can, where we must, to move toward $4 trillion in deficit reduction. Then we need to put entitlement programs on the table. This is where many Democrats get nervous because you are talking about things that mean a lot to us--Social Security, Medicare, and Medicaid, for example. I am as committed to those programs as any Member of the Senate. I believe we can protect the basic benefits under those programs and still find ways to make them stronger and longer.

Social Security, untouched, will make every promised payment, with cost-of-living adjustments, for the next 25 years. You can't say that about much in Washington. You can't say that about any program other than Social Security. We can do better by making minor, small changes in Social Security today and putting the savings back into Social Security, and then we can say it will last 75 years, which means everybody going into the workplace, starting their work career in America, will know they can count on Social Security to be there when they need it. That is an attainable goal, and if we face it honestly, we can do it.

When I was elected in 1982 and came to office in 1983, we were facing bankruptcy in Social Security. We came together with a bipartisan approach and passed it. We bought literally 52 years of solvency for Social Security, and not a single Member lost the next election because we did it in a bipartisan fashion, determined to make Social Security stronger. We can do it again.

Medicare--same story. Medicare, of course, provides health care for the elderly and disabled in America. It is extremely expensive because health care costs keep going up. Are there ways to reduce the costs of Medicare so that the people who are deserving of care--seniors and the disabled--will have it available to them?

On January 1 of this year, 9,000 Americans turned the age of 65; on January 2, another 9,000; and then every day since--every day for the next 19 years. The boomers have arrived. They have paid into Medicare and Social Security their entire lives, and they expect America to keep its promise. And we will. But we can look at Medicare and find ways to make that program more cost-efficient. There are certainly ways that are obvious.

Under the Medicare prescription drug program, we currently don't have a Medicare option. All we have is private health insurance company options. Let Medicare bargain with pharmaceutical companies to buy in bulk and bring down the cost of drugs for seniors, thus reducing their out-of-pocket costs and our costs as taxpayers. The pharmaceutical industry hates that the way the Devil hates holy water. The fact is that when you put Medicare in there, like the Veterans' Administration is in there, it can make a difference.

We need to include spending, entitlements, and revenue. I hope we can do it on a bipartisan basis.

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