Transcripts For CSPAN2 20090616

the government borrows it. and the way it does, it puts out an auction or sale of treasury bonds or bills -- t-bills they call them addition and people buy those things if they choose to do so and government pays them a certain interest rate, whatever the interest rate is at the time. on short-term debt instruments -- of a more or whatever -- those interest rates are still rather low because people are panicked over the economic situation. they were afraid to put their money in the stock market so they but the treasury bills and other people around the world did, too. they're not getting much interest but they feel like the government will pay them back in dollars eventually. but what has been happening to the ten-year treasury bill, one of the foundations of our borrowing. that rate has continued to go up. so two weeks ago i pointed out that the ten-year treasury yields had increased 54% this year at that time from 2.4% in january to 3.7%. a financial publications predict add few weeks ago that treasury yields -- quote -- "could top 4% this year." well, guess what? treasury yields topped 4% this week! well, last week it was. "the wall street journal," in a front page article on june 11 said that the ten-year treasury yield briefly hit 4% yesterday afternoon before closing at 3.94%. that would be a 67% increase in the treasury bill interest rate just this year. so while -- so, why are rates going up? there are some bad things about it and i will talk about that in a minute. why are they agreeing up? it seems there is disagreement between washington and wall street. "the wall street journal" article says this: "many policy-makers see the rise in treasury yields as a sign that investors are optimistic the economy is on the mend but many market participants say higher long-term bond yields indicate investors are increasingly worried about inflation." so i interpret that to mean the washington political crowd looking to see a positive vision here and to see something good, say it's because the economy is ding better and that could be a factor but the folks on wall street who are buying the t-bills say different. well, is the government responsible for this increase in interest rates and what does it mean? it seems that is a real possibility. the federal reserve is creating inflation concerns through its massive asset purchase program. the fed plans to purchase $1.25 trillion in mortgage-backed securities, $200 billion in freddie mac and fannie mae debt, and $300 billion in treasury bills this year. since not enough people apparently want to buy the treasury bills at lower interest rates the federal reserve is stepping in and buying them in an attempt to keep the rate done. so far, the fed has purchased $481 billion in mortgage-backed securities, $130 billion in treasuries. the intense of the program is to reduce the treasury yields and interest rates but some say it may be backfire. a "forbes".co forbes.com articls could have a different impact, could actually cause inflation rather than -- and even cause a rise in treasury bond yields. this is what he said: -- quote -- "this can become counterproductive to the extent that you stoke inflation fears and you get an inflation-risk premium built in to the bond yields, you can't ease that away. you do have to be careful and more measured than that." in other words, when there's a perception which may be reality that not enough people are willing to buy these treasury bonds at lower rates because they think even 4% may not be enough because they may fear that inflation is going to be 6% or 7% just down the road and they don't want to lock themselves in for 10 years at 4% interest rate and that's below the inflation rate. so the fed steps in and buys some of this to keep it low and that may be having the perverse incentive of causing a belief to occur in the marketplace that inflation is on the way and scares people even more. also, let me ask this about the voluntary purchase of treasury bills by citizens of the united states, people in china, middle east, and around the world. they don't have to boy treasuryy bills. and we're going to be offering amounts -- these kind of bills in volume we have never offered before in the history of the public. the question is, who wants to buy them? who wants to hold a mortgage on the united states? what if we defligh deflight our currency. maybe they want more. maybe china which had the huge trade surplus a few years ago, maybe they don't have it anymore. they don't. and maybe they're deciding they're not going to buy so much treasury bills in the united states. babmaybe they decide to invest n their own economy which has not done as well as it has done in the past. same with the middle east. they used to have huge reserves of american money as a result of the high price of gasoline and the price of "on th oil on the d market but that has dropped and perhaps they don't have the money on the treasury bills either. so who will buy them? we're not talking a little bit but about going from $5 trillion in total debt today to $10 trillion, really, $11 trillion in just five years. and $17 trillion in 10 years so we're talking about over -- over $10 trillion in new debt we have to sell somebody in the world market. also, what is the impact of the federal reserve, that entity we've created by law, when they buy treasury bills? what occurs there? i remember hearing mr. bernanke, the federal reserve chairman, talk about this on 6 "60 minute" and i went back and had the transcript of this program called up and we reviewed it and it is what i thought he said. in response to reporter school pelly's question the chairman bernanke said, about the fed buying t-bills: "it's much more akin to printing money than it is to borrowing." mr. pelly replies, "you've been printing money," and he replies "well effectively and we need to do that because our economy is very weak and inflation is very low." so if you want to know the definition of "printing money," as some people say that is not a fair thing to say, we are not printing money but mr. bernanke, the chief of the fed, the guy that does it, says we are printing money. why does this matter to the average american, even those not planning to buy a treasury bill any time soon, will be affected. that is because mortgage interest rates, what we pay to borrow money to buy a house with, track the ten-year treasury yield so as a ten-year treasury goes up, mortgage rates go up, too. and it's much harder for people to buy a home or to refinance or if you want to sell a 40e78 it's harder -- sell a home it's harder for the person who wants to buy because they have to pay considerably more in interest rate. according to the "wall street journal." 30 year mortgage rate has gone up 16% in two weeks from 5% to 5.79%. this is the money when you go out to borrow money to by a house with. what we need to happen in america is for people to decide to buy a home and take these vacant homes off the market and get somebody in them so they cannily icanlive in them and the difference between 5% and 6%. on $100,000, a 5% interest it would be $5,000 a year you pay just in interest and on 6%, it's $6,000 a year. over $100 more a month on just $100,000 and $200,000 mortgage would be twice that a year that you pay in interest alone. we hoped the interest rates would stay low to encourage people to by homes, to encourage people to refinance, and to be able to live a better life. "the wall street journal" article said that this increase from 5% to almost 6%, will cut the number of people with an incentive to recontinue their te their home by half. and let me just mention one more thing. one of the things that is interesting in all of this is the impact our spending has had on the economy. we all hoped it would have a pretty dramatic impact but it is not as effective as people thought. even i thought we would have some impact in the short-term but i believe that c.b.o. is correct that when we passed the $800 billion stimulus package that was to put money into the economy and build roads and bridges and we found out only 4% of the money went to roads and bridges and 96 went to other government spending. but the $800 billion was supposed to create a good bit of jobs and get this economy moving. i just want to say, things are going as well as we'd like. i remain optimistic. the fed doing all these things, the spending is coming along. surely we will have a benefit from that in the near term. but this just shows the deficit surge. the deficit, by which i mean, which is how much more money we are spending than betake in. this goes through march of this year. you can see how the deficit is increasing, how much our shortfall is, and by march it's already tied -- atop $953 billion. that's twice the -- more than twice, the biggest deficit president bush ever had and he was criticized for his deficits. that's twice, and we haven't gotten to the end of the fiscal year yet. what the c.b.o. projects and this is our own congressional budget office numbers and they're running the tale of how much w we are -- the tally of hw much we are spending and they estimate $1.8 trillion for the deficit by the end of the year. that is about four times the highest deficit president bush ever had. i just say that because people say, well, president bush had deficits too. yes, he did. a lot of that was not justified in my opinion but we never had deficits like this in the history of the american republic. and you have to borrow this money. so this is in march. by sent 30th, we're looking at a deficit of $1.8 trillion this year alone and the whole debt of the american republic since the founding is $5.7 trillion before this year's start. now, what is thahat -- a third d one year? and i would say this. we had hoped the spending and this activity would help improve the unemployment rate but as you can see it's going up. it was 6.6% and it has again up to 8.5%. well, really it's not 8.5%. that was in march. the latest nones are 9.4 -- the latest numbers are 9.4 jievment. i don't know how much real boston we have gotten from the reckless spending. so much of it we knew was not job-creative. and we debated that. it was clear that a lot of this was the kind of spending that would not create jobs. like i said, you heard about roads and bridges. well only 4% of the money went to roads and bridges. a lot of it went to all kinds of programs that are not really job-creating programs. so i'm concerned about that. now, this is a vibrant country, but what people -- and i think we have the capability of bouncing back from hard times. i'll just say, we're at 9.4% unemployment. unemployment in the early 1980's under president reagan when they had to break the back of surge inflation and mr. volcker at the federal rerks they got together and they did some tough things and they broke the back of 15%, 13% inflation, unemployment hit 10.8%, so it's not as high it was in the 1980's, and we bounced tbrak that. and we can bounce back from this. so i've got to say to my colleagues, if we don't have fiscal sanity in how we do our business, if we don't have a possibility of showing growth in revenues from economic growth and a containment of spending and our deficits are surging for as far as the eye can see, then i'm not sure we will have the kind of healthy, robust resurgence that we would normally expect to occur after a recession. look at these numbers, and it's just very, very, very disturbing. so we borrow all this money, and we spend it today. i know a great lawyer who's written a book request, "the caf character." this is a case for character here. it is the moral character of the united states congress and the president of the united states and how we approach our duties in a responsible manner. 2009, this year, we expect that this -- the taxpayers of the united states on the $5.7 parliamentary inquiry that we borrowed will pay $170 tbhl trvment that's a total loss. that's money that goes out to people who have loaned us money. it's interest, just like on your credit card or on your mortgage. $170 billion. and look how it goes up. this is a chart of the interest each year. and this is ten years from now under the 10-year budget that we're supposed to be operating under, that was passed here. according to the congressional budget office, they scored it, the interest we will pay on the debt in just 10 years from now will be $806 billion. all right, that's just money. how much is i that? how much is $806 billion? let me tell you what quey do today. a federal highway bill is -- the federal highway bill is about $40 billion. the federal aid to education in all its forms is about $100 billion. so now since we take money from the future and we spend it today to get some sort of hoped for stimulus that we haven't seen much of, in a reckless way, i think, we're going to saddle the people in 2019 with $806 billion, ten times the federal agency budget, 20-plus times the highway budget. we don't need to be focused on this and let me say one more thing: there is no projection in the debt and the deficit over 10 years by the congressional budget office. we drop down, i think, in two or three years under their projections and we're already hitting numbers that don't look like we'll meet those numbers. the economy is not a.g. as strength as they were projecting. it was a rosy scenario, but they project about $600 billion is what the deficit will be two or three years from now. 30%, 40% higher than anything president bush ever had. $6 billion. then it starts up again. and it goes up to the tenth year, and in the tenth year under the scoring of the president's budget by the congressional budget office, the deficit will be over $1 trillion in that year, $1.1 trillion, as i recall. so that's nonsustainable. and they're not projecting an economic slowdown. they've projecting solid growth over the las five years of this period. so i guess i would said to my colleagues, this is a matter that we need to start thinking about. it cannot be ignored. there's -- nothing comes from nothing. if you get money to spend today, you must spend every dollar of it with care, because you've borrowed it from the future. and somebody has to pay it back. it's not free money. it may feel like free today because we didn't have to pay higher taxes or we didn't cut some other spending programs to get the money to do what we'd like to do with it. we just borrowed t but borrowing has consequences. so every year from here on out, that $806 billion will go up probably, because in 2019 they expect not a balanced budget but an annual deficit of that year to be over $1 trillion. society thing is going to continue to work if we don't make some difference. if we don't make some changes, this will continue. by the way, it does not include the spending that we're talking about on health care, which you heard a speech about earlier, and i would just say this about it: the "help" committee has finally reported out a bill -- the health, education, labor, and pensions committee -- they reported out a bill which scores at $1 trillion. oh, we just got another $1 trillion not calculated in these numbers. well, everybody just needs to have health insurance. so who's going to pay pour it? we have to be smart. we have to see how we can improve health care, get more people insured, create a better system with the absolute lowest possible cost, both because we cannot continue this kind of reckless spending. and instead of learning a lesson from the already-surging deficits, we seem to be just blithely going on with a huge new spending program on top of that. the american people are -- i think are uneasy. they think that we are out of control up here. they don't think that they've ever seen anything like this. deficits the likes of which we've never seen in peacetime. and we've got the united states government passed a bill last fall that was supposed to buy toxic mortgages from banks and now they just bought a controlling share in general motors. how did this happen? did congress ever vote on that? no, we didn't vote on it. they took the language in that bill that i opposed and voted against because one of the reasons was was to broad and an unbelievable abrogation of congressional power to the secretary of treasury who'd already helped lead us into financial catastrophe. but people didn't panic. they all voted and gave him this power. well, did anybody know that we were going to use that money to buy an automobile company with? no. that was -- in fact, secretary paulson at one point was asked in a hearing did he -- what about buying stock in banks? that was supposed to be helping the banks. in the house committee he said, no, he didn't want to buy stock in banks. but a week after that bill passed, he was buying stock in banks and they haven't yet begun to buy mortgage -- toxic mortgages. maybe they'll begin soon. they say they've got a plan now. but i'm just sark the american people are -- but i'm just saying, the american people are right to be concerned about the reckless, irresponsible behavior of this government in washington. i hope they will continue to watch what is going on. i hope the american people will speak out and let the folks up here know that they expect us to do something more than deal with the problem next week. they expect us to be thinking about the long-term health of the american economy. i just heard a well-known financial expert say, well, you know what? he said, i'm not saying that there will be reckless inflation occur, although vom predicting that. this is what he said. he said after president reagan broke inflation and we got the economy on a soundtrack, the economy grew, mr. president, about 3% a year. and inflation was about 2%. he said, what i'm worried about is, what we're going to see in the next ten years is inflation about 3% and growth about 2%. that's not good. you want your growth to exceed the inflation rate, and so i don't know what'll happen. i can't predict it. we're going to have less money to spend on the things we need because we're going to have to be paying out a huge amount of known interest. those are real concerns. this matter is not going away. i believe the american people are becoming more and more attuned to these matters. that's what the tea parties were about and other things, a sort of spontaneous reaction by the american people saying, what are you guys doing up there? surely you know this isn't the way to handle america's business. so i would just say, i'm going to continue to report on things that are developing. surely we'll begin to see shom improvement in unemployment rate and maybe some economic growth in the weeks to come. you would normally expect that when you pump the kind of money that we pumped into this economy. and -- but in the long run, this beginnings to drag down the gains you make in the short run is what i'm saismght and in fact the congressional budget office said that if analyzing just the simple ustimulus package alone t would increase g.d.p. for two to three years, but if you took that for over ten years, the economy would be -- would grow less over the ten years than if we had no stimulus package at all. and that's because when you borrow money, not only do you have to pay interest on it, but it crowds out borrowing from the private sector. so if a corporation wants to borrow money through the issuance of bonds, they're having to compete with wit the treasury bills, who are now paying 4%. they'll have to start paying more because people think it is safer than a private bond. so it hurts the private sector because they're paying considerably higher interest rates to get people to loan money to them instead of loaning it to the united states government. i hope and pray that we can all figure out a way to work together to do a better job of being stewards of this economy. it's a high responsibility that we have. no one knows everything. no one has got a perfect answer to it. we're going to have to go through some tough times sms i think that's clear. no need to sugar-coat that. i'm not blaming president obama for everything that's gone wrong, and he inherited so much of this. i've just talked about secretary paulson. i don't think secretary geithner is any better. he was secretary paul sonses top advisor -- he was secretary paulson's top advisor when they came up with this plan last fall. but at any rate, we need to get our heads together and know one thing: nothing comes from nothing. there's no free lunch. if you borrow money to spend today, there will -- today, there will be a cost in the future, and those costs can outweigh the benefits that are occurring today. i thank the chair and yield the floor. the presiding officer: will the senator withhold the quorum call, please? a senator: mr. president? the presiding officer: the senator from illinois. mr. burris: thank you, mr. president. we live in a world divided. international tension and mistrust and even war too accept railt nation from nation -- separate nation from nation. but every two years 10,000 athletes from more than 200 countries come together to celebrate the human spirit

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