Sen. Toomey Talks with Andrea Mitchell about the 2012 Budget and the Debt Limit

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Some excerpts:

“I think both sides need to understand that nobody has complete control of the elected government, so neither side is going to get everything they’d like. You know, I’d like to defund Planned Parenthood, but I understand that Republicans don’t have complete control of the elected government, so I think what we should do is cut spending as much as we can, get the policy changes that we can, but move on because there are other bigger battles that we ought to be fighting.”

“You know how this works. Everybody’s got a seat at the table. Everybody’s got a vote so to speak. The president does by virtue of the veto. So we just need to recognize, we can’t dictate all the terms. We should aggressively go for everything we can get and then move on. I think the debt limit is a bigger, more important fight that we ought to be focusing on right now, and really not wasting all this time over what is, by comparison, a relatively small matter.”

“There’s a sense of enormous frustration. I don’t know a single one of us that wants to see a shutdown. It’s not so much that we’re afraid of it, it’s just that we think it’s terrible policy. Frankly, it’s very frustrating for me because, as you know, the Democrats had complete control of the elected government during the year last year when all of this should have been done and put to rest. But they didn’t pass a budget; they didn’t do their appropriation bills; they kicked these spending cans down the road; and now, we’re almost bystanders to the extent that this is really a negotiation between Harry Reid and John Boehner and the president, and what we’re talking about everyday within the Republican conference in the Senate is what are we going to do about the structural process reform we need before we raise this debt limit? What are we going to do about a budget for next year? We’d really like to be working on the big picture for the future of how we’re going to encourage economic growth and get spending under control, but it’s hard to make progress on those things when we’re mired in this, as I say, relatively small matter.”

“I want to cut spending as much as anyone in this town; I want a pro-growth policy, but I’ve been here before, and I understand that you can’t always get your way. What you got to do is get the best arrangement you can, get the biggest cuts in spending we can right now, and then move on and fight a bigger battle. As I say, I think the debt limit is a more important one; it’s more substantive; it’s a bigger deal; the White House is in the exactly wrong position on both substance and the politics of it, frankly. So I think we should get this done and move on to where we could have much more important progress.”

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Senator Toomey’s Maiden Speech

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Senator Toomey’s Speech at Heritage on the Debt Limit.

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Economists across the country are praising Senator Pat Toomey’s (R – Pa.) Full Faith and Credit Act (S. 163) and questioning Treasury Secretary Timothy Geithner’s recent criticism about the measure. The legislation currently has 21 cosponsors in the U.S. Senate and would ensure that the United States will not default on its debt under any circumstances.

Here is what economists saying:

·         “What Geithner’s comments really reveal is the Administration’s underlying tension between partisan politics and prudent financial management . . . Geithner evidently has eschewed the latter in favor of high stakes brinksmanship. To reassure credit markets, to eliminate the last shred of doubt the United States government will never default on the debt it has sold to finance its spending, Congress can clearly establish through legislation, that net interest will always receive first claim on incoming receipts. The Toomey-McClintock bill would accomplish that in a workable way.” – Dr. J.D. Foster, Heritage Foundation

·         “With this letter to Toomey, Geithner is taking President Obama’s ‘Chicken Little strategy’ to a new extreme. It seems odd to insist that a promise to lenders that their payments would be guaranteed, regardless of how the debt ceiling debate evolves, would not calm bond markets. Shouldn’t it calm creditors to learn that the United States is starting to make significant spending cuts? Frankly, the argument that the world is going to end unless Obama gets his way is starting to get a little old.” – Dr. Kevin Hassett, American Enterprise Institute

·         “Secretary Geithner is importing grade inflation into the world of public finance. Default refers to a failure to pay interest and/or principal. And since the federal government collects several times as much revenue as needed to fulfill those obligations, default will not happen unless the Treasury secretary actually wants it to happen for political purposes. Not having enough money to fully finance other government activities, by contrast, may represent a dysfunctional budget process, but in no way can it be categorized as a default – unless the term is stripped of all meaning.” – Dr. Daniel J. Mitchell, The Cato Institute

·         “On the narrow issue of whether failure to raise the debt limit would necessarily mean U.S. government default on its debt, Toomey is right and Geithner is wrong.” – Dr. David Henderson, Hoover Institution

·         “Senator Toomey reminds us that we are at a perilous time regarding the value of the U.S. dollar. If Congress does not discipline spending practices, the U.S. could be looking like Greece.” – Dr. Roger Meiners, University of Texas – Arlington

·         “By allowing U.S. bondholders to believe that a default on U.S. sovereign debt obligations can or will happen, bondholders will be forced to seek higher rates of return on their bond holdings. Simply put, the mere act of toying around with the full faith and credit of the U.S. government causes taxpayers to face higher borrowing costs. In order to provide certainty to U.S. credit markets and save U.S. taxpayers’ money, I hereby support Senator Pat Toomey’s (Pa.) Full Faith and Credit Act (S.163). It will send the needed signal to U.S. bondholders that default on U.S. sovereign debt is not an option.” – Dr. Brian Strow, Western Kentucky University

·         “I certainly do support Senator Toomey’s measure to prioritize spending in order to avoid the possibility of defaulting on the national debt. It is critical for the U.S. government to come to terms with its budget and budget process. There is no single action that is more important to maintaining our national security and standard of living. If we avoid facing the overspending issue squarely and honestly, we will find the dollar losing its status as the world’s reserve currency, causing in turn a much lower standard of living, higher interest rates, and debt slavery for the American taxpayer. The matter simply must be attended to, and I applaud Senator Toomey for his measure to help us do so.” – Dr. Robert Collinge, University of Texas – San Antonio

·         “Senator Pat Toomey’s Full Faith and Credit Act is among the most innovative and responsible pieces of legislation ever introduced in the U.S. Senate. It provides assurance that above all else, the United States government will honor its debt obligations. Such assurance is the most basic and essential of all moves for promoting economic and financial stability.” – Dr. Robert Genetski, Independent Economist

·         “I think it is imperative that the U.S. government have an articulated priority of the various claims it issues. Failure to do so is irresponsible and reckless. Prioritizing debt servicing is the morally prudent thing to do and the fiscally responsible thing to do. It would help lower the debt servicing cost of the national debt as politicians could no longer hold debt servicing hostage.” – Brian Jacobson, Wisconsin Lutheran College

·         “I fully support Senator Toomey’s Full Faith and Credit Act (S. 163). As long as the U.S. government has the wherewithal to pay its debtors, it should put such claims ahead of all other obligations, such as daily federal government expenditures. The federal government should never default on its debt, forcing some form of bankruptcy, when it can find the funds needed to pay debtors.” – Dr. Scott Hein, Texas Tech University

·         “I support Senator Toomey’s proposal as a commonsense proposal and a first step to restoring fiscal sanity in Washington.” – Dr. John McArthur, Wofford College

·         “I support the Full Faith and Credit Act to underscore the crucial issue of public debt. We must avoid the potential default on this debt and this act will establish an important legal basis for this commitment. With our debt secured in this way we can move forward with a balanced budget amendment to the U.S. Constitution to place limits on that debt.” – Dr. Barry Poulson, University of Colorado, Boulder

·         “Senator Toomey has come up with one of those ideas that we all recognize as extremely clever—one of those ‘Why didn’t I think of that?’ ideas. The leverage used to induce those who wish to regain control of our federal finances to vote for another increase in the debt limit is that if the limit isn’t increased the U.S. will default on its bonds. But as Senator Toomey rightly points out, even if we never borrowed another dollar there is sufficient revenue to pay our debt obligations, we just need to ensure that the debt is paid off first. His bill to legally require the government to pay principal and interest costs on the public debt with existing revenue prior to paying any other claim leads one to recall Adam Smith’s admonition in “Wealth of Nations”: ‘What is prudence in the conduct of every private family, can scarce be folly in that of a great kingdom.’ Don’t we tell our children that they must pay their debts first, before they spend on anything else? This action would create the proper incentive for federal legislators to address the structural problems in the budget and at the same time ensure the security and market for U.S. Treasury securities.” – Dr. Gary Wolfram, Hillsdale College

·         “I agree entirely with your plan. In the budget of the U.S. government, the timely payment of principal and interest should be given the first priority on funds received out of current revenue.” – Dr. Douglas K. Adie, Ohio University

·         “For any member of the administration to suggest in any way that servicing our debt does not come before any other spending is the height of irresponsibility. An ‘unconditional commitment’ clearly comes before any other desired spending. While your bill should not have been necessary, now that it is on the table, it is necessary to pass it so as not to send a bad signal to the financial markets.” – Dr. Lawrence Southwick, University of Buffalo

·         “Defaulting on U.S. Treasury bills, notes, and bonds is an absurd notion. That the Secretary of the Treasury even brought it up is ridiculous. The legal cost and fallout would be staggering. At least in the short run, the Full Faith and Credit Act would prevent this from happening.” – Dr. Deryl W. Martin, Tennessee Technological University

·         “I am in agreement with and am happy to support Senator Toomey’s Full Faith and Credit Act. I agree with the comments that this should not be viewed as a substitute for coupling an increase in the debt ceiling with the enactment of serious spending reductions. I think all sides agree that preserving the full faith and credit of the federal government is a top priority. This legislation insures that this is so in the event of a debt ceiling impasse.” – Dr. John Garen, University of Kentucky

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