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Federal Spending

The U.S. government’s deficit spending since 2001 has increased the amount of debt the Treasury must sell to raise cash needed to cover the gap between its income and spending. Interest on our national debt, $250 billion in Fiscal Year 2008, is the fourth largest item in the federal budget. Instead of investing in domestic priorities, this interest payment is money out the window.

The United States has been free of a national debt for only two years in its entire history – 1834 and 1835. Even in its first year of existence the country faced a debt of $75 million. From 1998 to 2001, the federal government ran budget surpluses. Since then, under President Bush’s budget, we have returned to deficit, and as of 2008 the national debt was more than $10 trillion.

Over the past 20 years, and particularly the last 10 years, most of our national debt has been sold to foreign investors. Foreign holdings of our national debt currently stands at more than $2.1 trillion. As of the end of 2008 the largest foreign holders of our national debt, are: China ($727.4 billion), Japan ($626 billion) and the United Kingdom ($130.9 billion). The consequence of this trend is that more and more of our money is sent overseas to pay interest on the national debt. Some economists argue that the foreign purchase of our national debt has helped keep interest rates low and keep the global economy relatively stable.

Our national debt is an important policy concern that has been ignored for too long. I am committed to restoring fiscal discipline to Washington. As a first step, the Democratic Congress in 2007 reinstated the “pay-as-you-go” budget rules that guided Congress in the 1990s and led to budget surpluses, but those rules were repealed by the Republican-controlled Congress in 2002. Pay-as-you-go rules require that any new spending or tax cuts be offset with a spending decrease in the same budget year.

With banks refusing to lend money, investors scared to invest and businesses laying off workers or closing their doors, there remains too much uncertainty and instability in the financial markets. In these circumstances, only the federal government can provide the resources to restore consumer confidence and put our economy back on track. The economic crisis facing our nation is too important to ignore. The real danger lies in doing too little.

Even as Congress and the Obama Administration make key investments in energy, health care and education, I remain committed to fiscal discipline and support President Obama’s goal to cut our nation’s deficit in half by 2013. This will mean tough choices and a review of every aspect of federal spending, but Congress stands ready to work with the President to accomplish this goal and help ensure our nation’s fiscal future.