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Harkin Invokes 1987 Reagan Default Warning in Senate Floor Speech

July 21, 2011

Harkin Invokes 1987 Reagan Default Warning in Senate Floor Speech

Urges Senate Defeat of “Cut, Cap and Kill Medicare” Measure

*As Prepared for Delivery*

WASHINGTON, D.C. – Senator Tom Harkin (D-IA) continued a series of floor speeches on the economy and the middle class in America today by invoking a warning from then-President Ronald Reagan about the risk of defaulting on our debt obligations.  Harkin urged the Senate to defeat a House measure he called “Cut, Cap and Kill Medicare” and instead find a balanced approach to deficit control.  To view previous Harkin floor speeches on the economy, click here.

“I urge my colleagues to vote against this destructive legislation,” said Harkin.  “Instead, at this eleventh hour, let us put ideology aside.  Let us come together in a spirit of compromise, for the good of the country, to pass a balanced package of spending cuts and revenue increases to bring federal deficits under control.”


The full text of his remarks, as prepared for delivery, is as follows.

“Mr. President, why are Republicans refusing to agree to raise the debt ceiling – something we have done 89 times since the 1930s, including seven times during the presidency of George W. Bush, and 18 times under President Reagan?

“In September of 1987, President Reagan used his weekly radio address to urge Congress to increase the debt ceiling.  He said:  “Unfortunately, Congress consistently brings the Government to the edge of default before facing its responsibility. This brinkmanship threatens the holders of government bonds and those who rely on Social Security and veterans benefits. Interest rates would skyrocket, instability would occur in financial markets, and the Federal deficit would soar.”

“President Reagan continues:  “The United States has a special responsibility to itself and the world to meet its obligations. It means we have a well-earned reputation for reliability and credibility—two things that set us apart from much of the world.”

“Mr. President, today’s Republicans, who constantly invoke President Reagan as a role model and a kind of patron saint, would do well to heed his words. 

“I also remind my colleagues that when President Reagan realized that his 1981 tax cuts were resulting in large deficits, he supported corrective income tax increases in 1982 and 1984.  In stark contrast to President Reagan’s example, today’s Republicans reject any compromise that requires raising any new revenues from the wealthy.

“Mr. President, nobody is talking about raising income tax rates.  We are talking about eliminating tax expenditures – special-interest tax breaks that Senator Coburn has described as “corporate welfare.”  As the distinguished chair of the Senate Budget Committee, Senator Conrad, pointed out this morning, tax expenditures now total more than $1 trillion, more than all discretionary appropriations in the Federal budget.  The wealthiest one-percent of Americans reap a whopping 26 percent of the benefits from these tax expenditures.  

“So, Mr. President, many Congressional Republicans are perfectly willing – indeed, they are eager – to slash Medicare, Social Security, Medicaid, education, and other programs that undergird the middle class.  But they have made it clear that they would rather default on the debt than agree to a compromise that requires shared sacrifice from the most privileged people in this country.  

“Mr. President, the legislation before us would enshrine in our Constitution a requirement that two-thirds supermajorities in both the House and Senate approve any measure to increase revenue.  As a practical matter, this would permanently lock in the benefits of current tax breaks for the wealthy, like the outrageous 15 percent tax rate for hedge-fund billionaires.  And by building a firewall to protect tax breaks for the wealthiest Americans, this legislation would shift even more of the burden of deficit-reduction on the backs of middle class Americans.

“Where did Republicans come up with this idea of capping federal spending at 18 percent of GDP?  This is not just an arbitrary number.  It is a number with a purpose.  The last time federal spending was at 18 percent of GDP was in 1966, when Medicare was just starting.  The most elementary budget arithmetic dictates that you cannot limit the federal budget to 18 percent of GDP and continue to sustain Medicare – not unless you are willing to cut the rest of the federal discretionary budget by nearly 50 percent.  

“This new assault on Medicare comes hard on the heels of the Republican budget – the Ryan budget.  And what is the centerpiece of that budget?  Its plan to dismantle Medicare and replace it with a voucher program that will require seniors to pay an additional $6,400 out of pocket each year. 

“So Republicans have now opened two fronts in their assault on Medicare.  The Republican budget takes a direct, open approach:  It simply dismantles Medicare. 

“And, now, this so-called balanced budget amendment takes an indirect approach.  In future years, it would defund Medicare.  It would put the federal government in a fiscal straightjacket, allowed to spend no more than in the mid-1960s, before Medicare.

“This legislation is also a direct threat to Social Security, another program that is vitally important to the middle class. Social Security is the bedrock of the American retirement system, ensuring that seniors are able to enjoy their golden years without falling into poverty or moving back in with their kids. 

“Unfortunately, as private savings and pensions have declined, Social Security’s modest benefit of around $14,000 a year has become the largest source of retirement income for two-thirds of our seniors.

Social Security remains rock-solid financially for the next quarter of a century.  But we need to make modest changes to ensure its long-term viability. The most sensible approach is to remove the cap on payroll taxes for those making over $106,800,which in conjunction with some other modest changeswould shore up the system for the next 75 years.

“However, as I said, the legislation now before us would require a supermajority vote in both houses of Congress in order to raise any additional revenue.  This would rule out the most obvious reform needed to ensure the long-term viability of Social Security.  This would almost certainly lead to sweeping benefit cuts, endangering the retirement security of our middle class. 

“And that is exactly Republicans’ goal: To radically downsize or dismantle not just Medicare and Social Security, but the entire Federal government. 

“I cannot emphasize too strongly that Republicans in Congress are rejecting any notion of shared sacrifice.  They demand that we dismantle Medicare and slash Social Security, education, infrastructure and other things that undergird the middle class.  They shred the safety net for the most vulnerable people in our society.  But they insist on shielding the wealthiest people in our society from contributing even one dollar to deficit reduction.

“Mr. President, I have a broader objection to the misguided legislation that is before us, today.  Why are politicians and policy-makers here in Washington so obsessed with the budget deficit, to the exclusion of other priorities?  I can assure you that the rest of America, beyond the Beltway, is concerned with a far more urgent deficit – the jobs deficit.  

“Members from both parties are demanding extraordinary funding cuts, trillions of dollars in cuts, with little concern as to the adverse impact on jobs.  But this is exactly the wrong approach.  It is the economic equivalent of applying leeches and draining blood from a sick patient, which is guaranteed to make him weaker, and may prove fatal. 

“The fact is, in the short term, the Federal government should maintain robust funding for roads, bridges, schools and other infrastructure investments . . . as well as things like education, public health, and research . . . that keep millions of Americans employed and inject demand into our still-fragile economy. 

“Deficit reduction is hugely important.  But our greatest challenge is the fragile economy and the jobs crisis, and the fact that our middle class is under siege.  Indeed, the middle class is being dismantled as fast as big corporations can ship our manufacturing jobs overseas.  People are losing their savings, health care, and pensions – and, in many cases, even their homes.  Now they fear that drastic budget cuts will destroy jobs, undermine their retirement security, and further damage the economy.     

Instead of this Republican plan, which is being sold through fear and fatalism, we need a budget that reflects the hopes and aspirations of the American people.  And we need to realize that there can be no real economic recovery, and there can be no return to fiscal balance, without the recovery of our middle class.  That is why our urgent, No. 1 priority must be helping to create jobs and putting people back to work.        

“It is time for a course correction.  We must stop the mindless march to austerity and retrenchment.  Smart countries, in tough economic times, do not just turn a chainsaw on themselves. 

“I urge my colleagues to vote against this destructive legislation.  Instead, at this eleventh hour, let us put ideology aside.  Let us come together in a spirit of compromise, for the good of the country, to pass a balanced package of spending cuts and revenue increases to bring federal deficits under control.”