Sunday, October 6, 2013

U.S. Treasury Secretary Jack Lew: "Congress is Playing With Fire" (CNN Video Clip, Text)

Treasury Secretary Jack Lew tells CNN's Candy Crowley that "Congress is playing with fire." (via CNN's State of the Union).




Here is selected text from the transcript:

"CROWLEY: Treasury Secretary Jack Lew is here. Mr. Secretary, thank you so much for coming in.

LEW: Great to be with you, Candy.

CROWLEY: If I can just sort of sum up what you've been saying, and that is come October 17, you have run out of tricks, although you don't use that word – but ways that you can sort of massage the numbers to keep it going so that you don't go over the debt ceiling that Congress has set. You need a new debt ceiling by October 17. What happens on October 18 if you don't get it?

LEW: Well, it's a very good question, Candy. And just to be clear, we crossed the debt limit in May. Since May, we've been creating some room to borrow by using what are called extraordinary measures. They've been used so many times, they are not as extraordinary as they used to be.

Tuesday I wrote to Congress saying I'd used my last extraordinary measures. I have no more. That means that on October 17, we'll run out of the ability to borrow. We'll be left with some cash on hand, and I've told Congress that it will be roughly $30 billion, and $30 billion is a lot of money, but when you think about the cash flow of the government of the United States, we have individual days when our negative or positive cash flow is $50 or $60 billion. So $30 billion is not a responsible amount of cash to run the government on. It won't last very long.

CROWLEY: (inaudible) telling me that nothing would happen on the 18th?

LEW: Well, I can't tell you. We've never gotten to this point, Candy. You know? We've never gotten to the point where the United States government has operated without the ability to borrow. It's very dangerous. It's reckless, because the reality is, there are no good choices if we run out of borrowing capacity and we run out of cash. It will mean that the United States, for the first time since 1789, would be not paying its bills, hurting the full faith and credit, because of a political decision.

CROWLEY: Let me play you something that Congressman Steve King of Iowa, a Republican, said talking about the possibility of servicing the debt past this deadline.

(BEGIN VIDEO CLIP)

REP. STEVE KING, R-IOWA: I don't think the credit of the United States is going to be collapsed. I think that all this talk about a default has been a lot of demagoguery, a lot of false demagoguery.

(END VIDEO CLIP)

CROWLEY: So the question is, is it technically possible for you to keep up with your debts? Can you not just pay the interest rate on these debts while this is worked out?
LEW: Candy, I've got to tell you that anyone who thinks that the United States government not paying its bills is anything less than default hasn't thought about it very clearly. Because let me ask you a question. Let me ask you, what happens if we're not able to pay Social Security on time? What happens if we can't pay disability and veterans payments on time?

(CROSSTALK)

LEW: - can't pay Medicare and Medicaid? In each of these cases, it means that families, businesses, institutions that are important, won't be getting what they rely on from the federal government.

CROWLEY: Does that mean coming on the 18th, you won't be able to pay Social Security? You won't be able to pay Medicare? You won't be able to pay all of these things?

LEW: I'm telling you that on the 17th, we run out of our ability to borrow, and Congress is playing with fire. If they don't extend the debt limit, we have a very, very short window of time before those scenarios start to be played out.

CROWLEY: Could you keep up on servicing the debt? That is paying the interest on the U.S. debt? Therefore, not defaulting as you (inaudible)?

LEW: Candy, if the United States government, for the first time in its history, chooses not to pay its bills on time, we will be in default. There is no option that prevents us from being in default if we don't have enough cash to pay our bills.

CROWLEY: But very often, in bills, and correct me if I'm wrong, can you not pay the interest? I'm just trying to figure out wiggle room, because what Republicans are saying is, these guys do this all the time as we run up. Look at Wall Street, it's kind of looking at it, going, this doesn't seem to be that big a deal. This time around, no one has been threatening to downgrade the U.S. creditworthiness. So the question is, is it true, as they say, that you can service the debt beyond the 17th?

LEW: Candy, let me put this in context. We are the strongest, most important economy in the world. We've already seen that with the government shutdown, the kinds of gridlock and brinksmanship in Washington hurts people and it hurts the economy. We saw in 2011, what happened as we approached the point of breaching the debt limit? You now have people who are saying, oh, it wont' be that bad. Well, I challenge them to answer the questions that I asked you. They are willing to concede that if we don't pay interest and principal on the debt, that that's bad. Well, you know, it is bad, but there are a lot of things that are bad. You can't pay all the bills if Congress doesn't raise the debt ceiling. And none of these bills are new. These are commitments that Congress made. It's paying old bills. It would be like somebody saying I ran up my credit card and I decided not to pay it. You can't do that. The United States is just too important to the world. Our currency is the world's reserve currency.

CROWLEY: Is this, could the president, is there a mechanism – and I think we went through this last time around in 2011 – is there a mechanism for the president, should the U.S. be unable to pay its bills, is he able to unilaterally lift the debt ceiling?

LEW: I think the White House has spoken quite clearly to this. The president does not have the authority to take action in that kind of a way. The president consulted with his lawyers, and that's the conclusion that he's reached.

You know, there is a desire here for there to be some kind of a magic solution. There is an easy solution, Candy. A majority in Congress would do the right thing if given a chance to vote to open the government. A majority in Congress would do the right thing if given a chance to let us pay our bills. Congress needs to work, they need to do their job, but the majority needs to be given a chance.

CROWLEY: If it is as bad as you say it would be, if this happens, if they don't raise the debt ceiling, the Congress does not raise the debt ceiling by the 17th, why wouldn't the president come to the negotiating table? If it's going to ruin, if it's going to shake the world markets, if it's going to ruin our creditworthiness, if we're, you know, we're the superpower, we can't be not paying our debt. If it's that vital, why isn't he at the bargaining table, saying what can we do here?

LEW: Candy, I think you know that the president has been, is and will always be for that way to negotiate to find the sensible middle ground. He did it in 2011. He did it last year. He did it this year in his budget, where he put forward tough policies.

CROWLEY: But if this is so dire, why not do it again?

LEW: I think you look at where we are right now, we've just gone through a couple of months where some very extreme parts of Congress took control. I don't think the leadership in Congress wanted a government shutdown. They ended up with a government shutdown because of the tactics of an extreme group trying to say we're willing to do real damage if we don't get our way.

President's message is clear: Congress needs to do its job. They need to open the government; they need to make us so we can pay our bills. And then we need to negotiate. And he –

(CROSSTALK)

CROWLEY: - president still won't sit down. I mean, it's like it just seems like a dual message here. It's really, really important; horrible things are going to happen if this isn't fixed, but I'm not going to negotiate.

LEW: Candy, things - in 2011, there was a very dangerous turn in the political debate from Washington. You had these same 50-100 members who were really willing to default if they didn't get their way. I've been through a lot of budget debates. I've been through a lot of debt ceiling debates.

Never did I hear people who said if I don't get my way, it's better to default. That's not acceptable –

(CROSSTALK)"

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