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Federal deficit threatens U.S. sovereignty« Thread Started o

Daily newsbrief journal for May 2004, also see http://www.usdemocrats.com/brief for a global 100-page perpetual brief and follow twitter @usdemocrats


Federal deficit threatens U.S. sovereignty« Thread Started o

Postby admin » Thu Jan 26, 2012 7:36 am

Federal deficit threatens U.S. sovereignty« Thread Started on May 23, 2004, 12:16am »--------------------------------------------------------------------------------Federal deficit threatens U.S. sovereignty, Bayh saysSenator against reductions to Social Security benefits, favors spending cuts and closing tax loopholesBy JAMES WENSITSTribune Political WriterBayhhttp://www.southbendtribune.c ... t_thre.sto WASHINGTON -- The projected $521 billion federal budget deficit is so big that it has become a threat to the very sovereignty of the United States government, according to U.S. Sen. Evan Bayh, D-Ind.Bayh said that when the government runs such a large deficit, it must borrow the money from somebody."Increasingly, that somebody is the Chinese Central Bank and the Japanese Central Bank and other foreigners willing to buy our Treasury bonds, and that's not a healthy thing," Bayh said during an interview in his Senate office. "That money has to be paid back with interest."Bayh's comments coincided with those of Federal Reserve Chairman Alan Greenspan, who said Wednesday that the nation can't afford to pay Social Security benefits promised to baby boomers.Greenspan suggested that Congress trim those Social Security benefits as a way of bringing rising budget deficits under control.Bayh disagreed, saying, "We should not cut Social Security benefits for the hardworking Americans who depend on that support in their retirement."Instead, Bayh said, "we need to work together to find ways to reduce spending and close tax loopholes."Bayh said he agreed with Greenspan that cutting spending should be the government's top priority, adding, "we must also heed his advice that any new tax cuts or spending programs be paid for."About half of the deficit can be attributed to the national economic recession, according to Bayh, who said the other half is equally divided between increased spending on national homeland security and the tax cuts that were sought by President Bush and approved by Congress."I like lower taxes, who doesn't?" Bayh said. "But the issue is one of affordability."Bayh said that because it is impossible to make accurate economic predictions 10 years into the future, it would have been better to have adopted short-term tax cuts to get the economy moving, then take a wait-and-see attitude."If we can afford to cut taxes, great," said Bayh, who was a proponent, during the tax cut debate, of adding a trigger mechanism that would have made the cuts contingent on the nation having the money to afford them.He said there is a difference between a temporary tax cut to boost the economy and a tax cut that's going to permanently drive up the deficit and the national debt."If we have the money and can afford to give tax cuts, that's one thing. If we don't have the money, that's something else," Bayh said."To go to the Japanese and Chinese to borrow a bunch of money to give to Bill Gates and Donald Trump and people like that doesn't sound like sound economic policy to me," Bayh said.The Indiana Democrat expressed concern that allowing other nations to carry so much U.S. debt basically amounts to a loss of sovereignty. "We shouldn't have to rely on the largesse of foreign countries to finance our own government," Bayh said.Bayh expressed belief that a relatively small amount of foreign debt is acceptable, but when hundreds of billions of dollars are involved, such debt is unhealthy."The real danger is that we are running such large budget and trade deficits that the rest of the world will decide, OK, we own enough U.S. Treasury bonds, we don't need to buy any more," Bayh said.To attract foreign investors, the government would have to raise interest rates on its bonds in order to finance the deficit, a move that, Bayh predicts, would raise mortgage rates for those holding adjustable rate mortgages and lead to stagnation in the U.S. economy, fewer jobs and a lower standard of living for Americans.Bayh said the situation also hurts the ability of the United States to demand fair trade agreements from nations that hold so much U.S. debt."How do we sit down at the negotiating table with the Chinese and Japanese and insist on a fair trade deal when they can look back across the table and say, 'Oh, really, we're the ones funding your government.' It really undercuts you."When the United States loses its ability to take strong stands in these and other contexts, "you lose some of your independence, and that's a terrible thing," Bayh said.The solution, he said, "is to get our financial house in order so we don't have to go hat in hand to the rest of the world borrowing so much money."Bayh said the budget surplus, while it existed, was a wonderful thing that should have been used to insure that Social Security and Medicare will be viable programs.He also suggested that some of the tax cuts should have been focused on the middle class, "but that's not the path that was chosen."Bayh said he is supportive of full funding for the Highway Transportation Bill, a major concern expressed by Indiana Gov. Joe Kernan and other governors attending the National Governors Association meeting that ended Tuesday.The highway projects in the bill would not only create construction jobs but would generate future jobs as well, Bayh said."Cutting Bill Gates' taxes by several millions of dollars, I don't know what that does to the economy," Bayh said, adding that taking that money and putting people to work building roads and bridges and other projects would have a real and tangible impact.Staff writer James Wensits:jwensits@sbtinfo.com(574) 235-6353
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