What can we understand from this stunning performance by Jared Polis (D-CO) in the debate on the House floor (July 28, 2011)?: 2½ minutes were yielded to Polis so he could present prepared remarks, equiped with a neatly-printed three-color chart showing yields and interest rates paid by countries rated AAA vs. AA. The bottom line in each column listed average interest rates as 3.75% for the countries rated AA (which is what could happen to the US as a result of this nonsense) vs. 2.98% for countries with a AAA rating (
like the US has today [updated Aug. 5: like the US had at the time of Polis’ speech]).
In prepared remarks, with the poster facing everybody, Polis said that the difference between those interest rates is “1.75% … almost 2%,” and went on about how much this difference would amount to in interest payments on debts in the hundreds of billions over decades to come.
With compound interest on that much over that long, even the difference between his “2%” and the actual .77% difference between the rates he was showing would be quite substantial!
Congress members have the privilege of correcting their floor speeches before they are permenantly published in the Congressional Record.; but here is the text as it was officially published (with my emphasis added) [click here for a pdf file of the printed page]:
[Mr. MCGOVERN, D-MA.] At this point I would like to yield 2½ minutes to the gentleman from Colorado, my colleague on the Rules Committee, Mr. POLIS.
Mr. POLIS [D-CO]. Mr. Speaker, this smoke-and-mirrors bill before us today actually stands to increase—yes, increase—the deficit of the United States of America by over $100 billion.
Let me walk the Speaker through the math here. This is why credit ratings matter: countries that have AA credit ratings—this is a group of them—pay an average interest on their sovereign debt of 3.75 percent. Countries with a AAA rating—this is a 10-year bond, but it would carry across 3-year, 5-year, 30-year in similar degrees—countries with AAA pay 2.98 percent. That’s 1.75 percent, almost a 2 percent difference between AAA and AA.
In passing this bill today, which only has a 6-month extension, we are jeopardizing our AAA rating that will be incredibly hard to ever earn back. And in addition to paying 2 extra percentage points on your variable rate home mortgage that middle class families can’t afford, 2 points more on your credit card debt, 2 points more on your car debt, in addition to that, Mr. Speaker, the government, the biggest borrower in the country, will pay more interest on the debt. Over 10 years that 1.75 percent difference, which is just taking the average between AAA and AA, costs over $100 billion a year in extra interest on the debt. Over a 10-year period, over $1 trillion of additional interest paid on the Federal debt.
So what are we doing? Cutting $915 billion and risking adding over $1 trillion in additional expenditures.
This smoke-and-mirrors effort before us today risks increasing the Federal deficit at a time when we all know we need to decrease Federal spending, we need to decrease our deficit. The last thing we need is to set motion forward to actually up our interest rate, jeopardize our credit rating because of the short-term nature, and increase the interest payments on our Federal debt.
I encourage my colleagues to look at these numbers and vote ‘‘no’’ on the underlying bill.
Mr. DREIER [R-CA]. Mr. Speaker, I yield myself 15 seconds to say to my friend that he is absolutely right: if we go into default, if we don’t extend the debt ceiling, we are, in fact, going to see an increase in interest rates. The fact of matter is the ratings agencies like Standard & Poor’s say that we not only have to increase interest rates but we have to put into place a deficit reduction plan that will pay down our debt, and that’s exactly what’s happening.
With that, I would like to yield 2 minutes to our hardworking colleague from the Energy and Commerce Committee, the gentlewoman from Brentwood, Tennessee (Mrs. BLACKBURN).
Mrs. BLACKBURN [R-TN]. Mr. Speaker, I rise today to offer my support for the Budget Control Act of 2011, what I like to call Cut, Cap, and Balance 3.0.
Last week the House passed Cut, Cap, and Balance 1.0 in bipartisan fashion. Not surprisingly, Senator REID and his Democrat colleagues in the Senate failed to even allow for a vote. Speaker BOEHNER then offered Cut, Cap, and Balance 2.0, which, according to the CBO, failed to generate sufficient savings to accompany the debt ceiling increase. So the Speaker went back to the drawing board, found more cuts and reductions, and I applaud him for that. …
I have included enough from the two Republicans who followed Polis to show that they did not see the math problems here (I’m ignoring other problems, such as the questionable inference that a 2% increase in interest on federal borrowing would automatically result in a 2% increase on every other debt by all Americans). But how could anybody watching not have seen the basic, elementary arithmetic problems? Here is the audio — and again, I have included enough of the two following speakers to show their failure to see the problem (note: you can also click on either of the C-Span images above for a link to the streaming video of the session; this segment begins about 21½ minutes into the session):
Are they smarter than fifth-graders?
Again, I come back to the fact that nobody noticed the error here — when the remarks were prepared for delivery on the floor, as they were being delivered, or even after that, before they were finally published in the Congressional Record. Any fifth-grade teacher would be upset to find that her/his students would not see this directly, without even needing to do any subtraction or any other calculation.
Starting in Pre-Kindergarten, children learn to develop “number sense” as a basis for understanding mathematical relations, which enables them to make estimations, and also to judge when the results of counting or calculation seem to be unreasonable, or possibly in error.
They also learn the reasonableness of rounding up or down when making estimations. It’s hard to imagine any context where the number .77 would be reasonably rounded up to 2; but even rounding 1.77 up to 2 is problematic. In some contexts it could be valid (if, for example, I figure that I need to order 2 pizzas for 7 people if I want each of them to get ¼ of a pie); but when talking about rates of interest to be paid on hundreds of billions of dollars compounded over ten years and beyond, rounding from [even] 1.77% [not to speak of 0.77%] up to 2% would produce wildly inaccurate results.
And these people are making the decisions about our nation’s finances?
Back to our beginning question: What can we understand from this stunning performance by Congressman Polis? — and from the performances by his colleagues in not noticing the problem with his calculations?
Obviously, there is a problem with mathematics education on exhibit here in these performances and non-performances.
Less obvious, but arguably even more serious, is the problem with our civic education and our civic processes: It probably is safe to assume that Mr. Polis and his colleagues do have sufficient mathematical understanding that they would recognize these problems, immediately, if these math problems were pointed out to them — or if they were paying attention. And that’s where the real problem lies: Our “leaders” are not paying attention. They aren’t paying attention to experts who understand the economics. And in their floor “debates,” they are obviously not listening to each other — and sometimes, appartently, they aren’t even listening to themselves!
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