U.S. Debt Transparency: Cornyn & Kyl Call for Assessment of

Assess economic national security risks of ballooning U.S. national debt WASHINGTON Recognizing that Americas growing national debt increases our dependence on foreign governments U.S. Senators John Cornyn (R-Texas) and Jon Kyl (R-Arizona) today introduced legislation to improve transparency on which nations hold U.S. debt and to ensure that Congress is fully informed of the economic and national security risks associated with that debt. Reckless deficit spending represents not only a fiscal crisis but also a growing national security vulnerability" said Sen. Cornyn. Our national debt now approaches $13 trillion and a big chunk of that change is held by China and other foreign governments that do not necessarily share our interests.  Policymakers and the American people need better and timely information to gauge potential national security risks. My hope is that this legislation will provide a reality check help rein in the out of control spending and make our nation safer" Cornyn said. President Obamas budget will double the national debt in five years and triple it in 10" said Sen. Kyl.  The interest payments alone will reach nearly $900 billion over the next ten years which is more than the United States spends on education and national defense.  While the President likes to say that he inherited the nations debt from his predecessor the fact is from the day President Obama took office until the last day of fiscal year 2010 the debt held by the public will grow by $2.3 trillion according to the White Houses Office of Management and Budget.  On top of it all its one matter if this debt is being purchased by Americans but its not.  Its being financed by foreign investors who have no interest in whats best for our domestic policy.  When they want to be repaid theyll either call in the debt or sell it.  And the more we need to borrow the more beholden we will be.  American financial markets and ultimately the standard of living of the American people will be vulnerable to foreign pressures" said Kyl. U.S. government spending has exacerbated the dependence of the U.S. on foreign creditors such as the Peoples Republic of China. Today China is the largest foreign holder of U.S. government debt. Chinese government officials have publicly threatened to use their U.S. debt holdings as well as other economic means to retaliate against U.S. policies they oppose. In recent response to a U.S. decision to sell defensive weapons systems to Taiwan an official of Chinas Peoples Liberation Army warned that China might sanction the U.S. by dumping" U.S. government bonds. A rapid Chinese divestment of U.S. debt holdings would have a destabilizing effect on the U.S. economy. The bill introduced by Sens. Cornyn and Kyl The Foreign-Held Debt Transparency and Threat Assessment Act of 2010 will help prevent disastrous situations such as these by equipping U.S. policymakers with information on emerging policy concerns.  The bill will require the President and the U.S. Government Accountability Office (GAO) the evaluation and auditing arm of Congress to provide regular analysis of the national security and economic implications of both the national debt and foreign holdings of U.S. Government bonds notes and Treasury bills.   The Cornyn-Kyl bill will:

1. Improve transparency and reporting regarding overall foreign holdings of U.S. debt enabling a more accurate view of which countries are financing U.S deficit spending;
2. Require the President to provide Congress with quarterly risk assessmentsboth classified and unclassifiedon the national security and economic hazards posed by current levels of foreign holdings of U.S. Government debt instruments";
3. Instruct the GAO to provide Congress with an annual risk assessment on national security and economic hazards posed by the national debt as well as recommendations for reducing federal spending; and
4. Require the President in the event that any heightened risks are found to exist to address those risks and implement a plan of action to reduce Federal spending.

Background: THEN SEN. BARACK OBAMA (D-IL): Increasing Americas Debt Weakens Us Domestically And Internationally. Leadership Means That The Buck Stops Here. Instead Washington Is Shifting The Burden Of Bad Choices Today Onto The Backs Of Our Children And Grandchildren. America Has A Debt Problem And A Failure Of Leadership." (Sen. Obama Congressional Record S.2237-8 3/16/06) GOVERNMENT DEBT … COULD THROW THE GLOBAL FINANCIAL SYSTEM BACK INTO CRISIS" Historic Levels Of Government Debt In The Developed World Could Throw The Global Financial System Back Into Crisis And Clear Plans Are Needed To Bring It Under Control The International Monetary Fund Said Tuesday." (IMF: Mounting Debt Threatens Global Recovery" The Washington Post 4/20/10) The Agency Said That Sovereign Risk -- The Chance That Sovereign Nations Have Racked Up So Much Debt They Wont Be Able To Borrow Enough Money To Pay Their Bills -- Is Now Perhaps The Central Threat To The Global Financial System." (IMF: Mounting Debt Threatens Global Recovery" The Washington Post 4/20/10)   Governments In The United States And Across Europe Have Accumulated Levels Of Debt Not Seen Since World War II as the recession crimped tax receipts spending rose on entitlement programs and emergency measures were put in place to support the economy." (IMF: Mounting Debt Threatens Global Recovery" The Washington Post 4/20/10) The Crisis Has Lead To A Deteriorating Trajectory For Debt Among Developed Countries Which Could Cause Higher Interest Rates And Slower Growth And Weaken The Broader Financial System The IMF Said. Government debt could take the credit crisis into a new phase as nations begin to reach the limits of public sector support for the financial system and the real economy." (IMF: Mounting Debt Threatens Global Recovery" The Washington Post 4/20/10)