Everyone Except House Dems Thinks We Need Deficit Reduction, Even China

Despite Warnings From China and Others, House Democrats Continue to Demand a New Credit Card with No Strings Attached

• The Chinese government expressed its concern last week about rising U.S. indebtedness, stating its hope that “responsible policies” would be adopted towards deficit reduction.
• These comments from China follow recent threats from Standard and Poor’s that they may downgrade U.S. debt without meaningful steps towards reducing our debt. Such a ratings downgrade could roil economic markets.
• House Democrats appear to be the only people unconcerned with cutting spending to reduce our deficit and debt. Last Friday, Democrat Whip Steny Hoyer claimed that nearly all House Democrats would support raising the debt ceiling with no strings attached, effectively authorizing a new credit card for them to continue their spending spree.

BACKGROUND:

As the largest foreign holder of U.S. debt, it was noteworthy last week when the Chinese government expressed its concern about rising U.S. indebtedness, stating its hope that “responsible policies” would be adopted towards deficit reduction:

CHINESE GOVERNMENT: US NEEDS TO ADOPT “RESPONSIBLE POLICIES” TO ADDRESS DEBT: “ ‘We hope the U.S. government adopts responsible policies to protect the interests of investors,’ said Chinese Foreign Ministry spokesman Hong Lei at a regular briefing, carrying on the consistent line from Beijing, which held at least $1.152 trillion in Treasury securities as of April, making it the U.S. government’s largest creditor. A spokeswoman for China Investment Corp. said the sovereign wealth fund wouldn’t comment, so as not to cause ‘unnecessary moves in the market.’” (William Kazer, “Asia Quietly Frets Over U.S. Debt,” The Wall Street Journal, 7/15/2011)

CHINESE RATING AGENCY: U.S. IS “ISSUING NEW DEBT TO REPAY OLD DEBT”: “A little-known Chinese ratings firm that specializes in controversial reports, Dagong Global Credit Rating Co., said that like Moody’s it was considering a cut in its sovereign rating on the U.S.—though with blunter language. ‘Whether the U.S Congress approves the deal to raise the country’s debt ceiling or not, it can’t improve the repayment ability of the U.S.,’ said Guan Jianzhong, chairman of the firm, which said in a report that the U.S. government is ‘issuing new debt to repay old debt.’” (William Kazer, “Asia Quietly Frets Over U.S. Debt,” The Wall Street Journal, 7/15/2011)

KEEP IN MIND: OBAMA’S TREASURY HAS LOST TRACK OF EXACTLY HOW MUCH OF OUR DEBT CHINA OWNS: “When the Treasury Department revamped its rules for participating in government bond auctions two years ago, officials said they were simply modernizing outdated procedures.

“The real reason for the change, a Reuters investigation has found, was more serious: The Treasury had concluded that China was buying much more in U.S. government debt than was being disclosed, potentially in violation of auction rules, and it wanted to bring those purchases into the open – all without ruffling feathers in Beijing. …

“The incident calls into question just how clear a handle the Treasury has had on who is buying U.S. debt.Chinese entities hold at least $1.115 trillion in U.S. government debt, and are thought to account for roughly 26 percent of the paper issued by Washington, according to U.S. government data released on June 15.” (Emily Flitter, “U.S. Caught China Buying More Debt than Disclosed,” Reuters, 6/30/2011)

These comments from China follow recent threats from Standard and Poor’s that they would consider downgrading U.S. debt without meaningful steps towards reducing our debt. Such a move could roil economic markets: 

S&P “SEES 50 PERCENT CHANCE OF DOWNGRADE FOR U.S. CREDIT RATING,” LINKED TO SOLUTIONS FOR RISING U.S. GOVERNMENT DEBT BURDEN: “Standard & Poor’s says there’s a 50 percent chance it will downgrade the credit rating for U.S. debt in the next 90 days. … If the agency believes Congress and the White House cannot reach a ‘credible solution to the rising U.S. government debt burden,’ it could lower the rating several notches, down into double-A territory. Such a move would significantly drive up borrowing costs for the federal government, and in turn roil global markets which widely treat Treasury bonds as risk-free assets.” (Peter Schroeder, “S&P Sees a 50 Percent Chance of Downgrade for U.S. Credit Rating,” The Hill, 7/14/2011)

“U.S. DOWNGRADE WOULD RIPPLE INTO EVERY HOME”: “The threat that the U.S. might lose its coveted Aaa debt rating probably seems esoteric to most casual observers. … But the ripple effect from such a downgrade would be widespread and potentially severe, impacting everything from local municipalities and the neighborhood bank to home mortgages and student loans.” (Dunstan Prial, “U.S. Downgrade Would Ripple Into Every Home,” Fox Business, 7/15/2011)

House Democrats are apparently the only people in America unconcerned with cutting spending for deficit reduction. Last Friday, Democrat Whip Steny Hoyer claimed that nearly his entire caucus would support a no-strings-attached bill to raise the debt ceiling, effectively authorizing a new credit card for them to continue their spending spree. When Democrats finally recognize that America faces a debt crisis, will it be too late?:

REP. PETER WELCH (D-VT) SAYS IT’S A NEW CREDIT CARD WITH NO STRINGS ATTACHED OR DEFAULT: “Rep. Peter Welch (D-Vt.), a chief deputy whip who’s championed a straight up vote on raising the debt limit, portrayed a clean vote as the only remaining alternative before the government maxes out on its borrowing authority on Aug. 2 – saying it was difficult for him to see a path to an agreement with the GOP.

“’It’s looking like default or a clean extension,’ Welch said in an interview. He said he was getting support from ‘more and more Democrats, including some members who did not vote for the clean extension on the floor however many weeks ago … we’re absolutely intent that we’re keeping our AAA credit rating.’” (Seung Min Kim, “Hoyer: Dems would support a ‘clean’ debt ceiling vote,” Politico, 7/15/11) 

DEMOCRAT WHIP STENY HOYER (D-MD): “I have told Mr. Boehner that our party stands ready to ensure we do not default on our debts. And I believe that almost every member of our party if not every member of our party would vote on a clean extension to make that happen.” (Remarks from Steny Hoyer during Press Conference, MSNBC, 7/15/2011)