tv Key Capitol Hill Hearings CSPAN October 10, 2013 8:00pm-10:01pm EDT
greatly since the time i went to school, what we used to talk about is the labor was paying the taxes. if people are unemployed hey're not paying any tax. how's that good for the country? and all this fighting we're doing on the debt limit and all that, we forgot about the thing that could get us out of this, we need more employment. that's the first thing. and there's the uncertainty that the republicans is always talking about that's in the market -- are you there? >> we sure are. >> the uncertainty that niese the market is not what the uncertainty is the manufactures don't dare make this expensive stuff. somebody that's got money to buy it. and the rich people they can't buy it all. i mean, they're trying to, a lot of them, but it's
ridiculous the way we kind of lost, i think, our bearings on what economics is. another thing that's burning me about verybody's talking backing the american dollars. what i was taught when i was in college is that the goods and services that a country produces is what backs the currency. if you're not producing anything, you haven't got any backing. >> alan -- >> you said you're a farmer. what do you grow? farmer/rancher. wheat and corn and alfalfa hay. and that's another thing, we have a direct payment that's due to us that can't be paid for us right now. it's been a whole year in the making. i get $7,000 a year on usually on the deal. we're not going to get that until the government guys and the usda can go back to work.
>> ok. alan, thanks for tuning in late in the afternoon in utah. we appreciate it. >> thank you. >> and by the way you can check ut those numbers at u.s.debt clock.org. right now $16.9 trillion and change. had the democrats been serious about a consensus solution, they never would have closed the government in the first place. our last scall from gary from morristown, tennessee. can you turn the volume down on the set? we'll hear you much better. go ahead, please. gary, you with us? >> yes. >> please, go ahead. >> thank you for taking my call. to me -- brothers and sisters. they fight but eventually they'll get in there and someone has to step in and just talk to them im. eventually though they'll get along. me, i think if we -- and it's
been brought up. if the country had a flat tax where everyone can pay their fair share on anything that they would buy, i believe that will help time-out government - help out the government that people in have all these loopholes and having them pay the government instead of not paying anything at all. >> no agreement tonight from the president as he sad down with 20 house republicans early in the day the president sitting down with senate democrats. you can check out all of our information any time on c-span.org. the treasury secretary, he began his day at 8:00 testifying by the finance committee. here's the hearing in its ntirety.
[captioning performed by national captioning institute] [captions copyright national able satellite corp. 2013] >> here we go. he meet willing come to order. >> on january 27, 1838, a young state legislator named abraham lincoln spoke in springfield, illinois. at the time america was a deeply divided nation. and lincoln warned that the greatest threats to the young
democracy was -- were inturtle. he said "if danger ever reaches us it must spring from up amongst us. it cannot come from abroord. if destruction be a lot, we must ourselves be the author and finisher. as nation of free men, we must live through all time or die by suicide." the actions of the past few weeks, the extremism of a small core of members in the hourps have crippled congress and put our nation on a very perilous path. for more than 200 years the united states has been true to its word. has honored its obligations and paid its debt. yet today a small group of hard liners is using our economy to refute the affordable care act. let me be clear, we're not going to let that happen. the affordable care act is not going to be dismantled this
this budget fight. the issue is not up for debate. our committee wrote the affordable care act. i'm always willing to straighten the law to better serve the american people. but as the president said we cannot negotiate under the threat of default on the nation's bills. before any debate, before any deliberation, we need to reopen the government and faye nation's bill -- pay the nation's bills, no strings atatched. then we need to work together, return to regular order. we mustards the nation's long-term budget challenges including entitlement and tax reform. but right now we need to prevent another self-inflicted wound to america's economy that is what defaulting on the debt is, a self-inflicted wound with global consequences. the deadline is fast approaching and seven days, the united states treasury will
have exauthsed all extraordinary measures to stay under the debt limit in seven days the united states will be at risk on defaulting on payments. the united states of america will be forced to look for loose change in the sofa in order to pay its bills. while the government shutdown has been disruptive, a default will be a financial heart attack. it would have widespread, long-term economic consequences. financial markets are already showing serious signs of stress. the dow has drops more than 800 points in the last three weeks and one month treasury has risen through it highest level since the 2008 fiscal crisis. the debt ceiling is reached. the government would immediately have to slash it be 20 or 30% to drive the nation back into reception. >> the pain will be felt across very sector of society, social
and veterans' benefits would be slashed. every government plam be devastated by deep cuts. families will feel it at firsthand with dramatic drops in their retirement savings, homes would be lost. interest rates on mortgages and student loan would soar. we could pay at bond holders and interest on the debt. but they fail to mention this game would force the treasury to pick and choose which programs to pay, forcing vital programs like social security, medicare to complete for funding. his idea is just irrational. the fault would have a catastrophic impart on the economy as well. he warned that the fault would have barren consequences for the economy. chris steen lagarde said it is
mission critical the debt limit be se solved as soon as possible. this is serious. the whole world is watching. our actions here in the next couple of days will have global implications. we are the most important economy in the world. currency. are the default would put the global economy in chaos. of that, there's no doubt. last week they warned us that the default could echo the events of 2008 or worse. people here forgotten what happened in 2008. the collapse of lehman brothers sent off a financial earthquake. markets plunged. unemployment surged.
america's confidence was shattered to the core. the 2008, the aftermath could still be felt today. we cannot let that happen. we have a responsibility to avoid another economic disaster. our leadership, our result will be tested in the coming days. we, all of us here inner this room, we have an opportunity to pull america back from the brink. it is a plain increase without any amendments. it simply allows the united states to pay its bills an avoid a catastrophic default. this is only a short-term solution but it will help pull us back from the edge to allow us to pause, take a deep breath and once again try and come together to move forward.
i've been hearing this close to 35 years. in congress going on 39. i've seen my fair share of fights. but never have i seen congress so angry, so gridlocked, so broken. and it doesn't have to be that way. i know the public might find it hard to believe but there are some very reasonable people here in congress. there are many who want to do what is right. there are many who want to work together to conduct the business of our nation. now, i'd say to them and all my colleagues, now is the time. now is the time for congress to stop fighting old battles. now is the time for congress to come together and do what is right for our nation. and now is the time for congress to reopen the government and fulfill america's financial obligations. i began my remarks with a quote from president lincoln. and i thought it appropriate to
conclude with another one. lincoln once said and i quote him "i'm a firm believer of the people. if given the truth, they could be depended upon to meet any national crisis." and that is why we're here today. we need to give the american people the truth, the real facts. and only then when everyone understands the real risks, the facts and the truth will be able to meet the national crisis. >> well, thank you, plch. i want to thank you for holding today's hearing on the debt limit. i also want to element you secretarial lewis to the committee. we appreciate you coming. >> thanks. >> at this early time. during the debate over the debt limit increase in 2006, then senator obama stated that "the fact that we are here today to debate raising america's debt limit is a sign of leadership failure." leadership, he said, means that the buck stops here.
instead washington is shifting the burden of bad choices today on to the backs of our children and grandchildren. america has a debt problem and a failure of leadership, mericans deserve better. gross state our was 8. 33 billion. and now it's standing at $16.8 trillion. the economy.ts this pose as long economic and fiscal limit. during the 2006 debt limit debate, then senator biden said "why vote against the debt limit increase, if you cannot clang the fact that we have or my vote against the debt limit increase? cannot change the fact that we have incurred this debt
already. it is a statement that i refuse to be associated for. what a difference in attitude there's been since then. now president obama as vice president biden preside over an administration that tells us that raising the debt limit in your word simply allows us to pay our bills. you have also publically stated that only copping has the power to lift the debt limit. now, while it is extensively has the congress power. it is not true that raising the debt limit has only to do with spending congress has already approved this line of argument is based on premise that congress makes spending decision unilaterally and that is not utive branch
involved in the process. while president obama's budgets have not been well received even by democrats in congress, the president has been deeply involved. the administration also issues statements of administration policy and veto threats on spending bills an other pieces of legislation. president's work with congress to enact their domestic ageneral zas. >> we all remember how president obama unveiled and push his trillion dollar stimulus through democratic congress that he then signed into the lawn. has made with no input from congress. for example, there was the decision to delay the imemployer debate. and it would cost an additional 12 billion to our deficit.
conk never voted on the delay. it was a unilateral choice made at the treasury department. the question surrounding spending and the debt limit or congress and congresses alone to answer. fall. case of there have been several other sinces from the administration concerning the debt limit. one is the president's claim that nonbudget items have never before been attached to the debt limit increase. fact m to which a connection are sober yated with the pinocchios over here. the democrats only 26
were. for the first time in recent history people were commenting on the inability to make a timey claim if you would go back to president clinton's administration and read the comments by them you will see that in claim is also false. treasury secretary ruben and then white house chief of staff leon panetta that supports this >> ok. >> secretary, i hope that during today's hearings we do not regress sbee comparatives recollections of history. the issue with face is that you another debt limit increase. there have been seven debt limit increases since the president came into office. llectively raising them 16.7
trillion, a cumulative increase of $5.4 trillion. when talk about the future increases and the debt limit, tall administration will say is that one -- they want a clean. and two they refuse to negotiate. now, we don't know what they means. what they mean a quote, clear increase. they don't even know houpping they want the increase or for how long long. it would constitute a negotiation. the missouri posture is nert productive or helpful toward resolving the doesn't impabble. what the administration afierce be saying is that it is entirely up to congress to how ase the let limiting much and how long more. does it mean that if congress chooses to enaket a two-debt limit increase will president
will sign it? because congress is solely responsible for inning the debt limit. yet, somehow, don't think that's what the president's looking for when it comes to the debt limit. and just the past couple of day, the president has expressed willingness to increase driver's license short-term which sounds a willingly to negotiate terms. finally mr. steel short on details. secretary lu, the lack of engagement is just one of the evidence that limit debate. that i find disconcerting. . publically questioning americans and suggesting that people may be too calm in an effort d apparent effort to whip up uncertainty in the market. it is disconcerting that you have suggested the payments of social security to retirees or
disabilitied american workers are at risk especially if you're a trustee tree did that. -- the debt tion limit impasse. at the same time, the oversight chounl you share has been silent and refuses to tell the american people how it would respond to these gifts. that n disconcerting that could have a conversation which everyone agrees are the main drivers of our debt. the president has refused to discuss entitlement re forms. she gets another tax hike. what we heard from the other administration from ntitlements is a series of
that. that seems to get larger every day that debt. >> the biggest question i have is if the obama administration won't negotiate on entitlements texts, when will they? >> i have put five and personally gave them to the president earlier this year. you have copies of this proposal yourself. yet. ing in this day, i cannot get a response. >> i offered it in good fifth. most recently the senat majority leader has introduced a "clean" limit bill. senator baucus would increase the debt limit until january 6 anuary 15.
that apparently is the position of the senat deposit catic leadership. but is someone inconsistent with the president's recent willingness to she a short term in the debt loiment. e have a lot to discuss today. my hope is that question gate real since of where the administrator wants to go. and i also hope we can get pass the arguments. our nation's dead is now larger as the share of our economy that at any time since the 8.ike up in 19 the it is not all due to the financial crisis. instead, it is a problem that all of us both congress and the commeck active branch need deal with.
and the only way to responsibly deal wit is to confront our government spending. which will require our administration to do something that is is not refusing to deal which is negotiate. as president obama said in 2006, regarding the let limit. measures deserve better. i appreciate you holding this for me. >> thank you, senator. he secretary of treasury begins. we have a full attendance. we have to be very efficient with our questions and our answers. just a couple of minutes after 9:30. i urge you to respect others so that we have a chance. >> thank you, mr. president. members of the committee.
i appreciate you the opportunity. i appreciate the invitation to discuss the impact of congress to increase the debt limit. congress alone has the power to act to make sure that the full faith and credit of the united states is never called into question. no congress in 2004 of america america has allowed the country to default. and it's my sincere home that we will not be the threth. it's the recourse of self-inflicted wounds. today we face a then itself beginning to deliver an unnecessary blow to our economy right at the time when the america economy has pain stakingly fought back since the orse recession since the
recession. t our often, the interest rate elative to the highest reached october. nd i've reached the same level . the only way to avoid inflicting damage is for congress to act i know from my conferences with a wide range of business leaders representing industries from retail to manufacturing and branking that is a par mound concern for them. that's why it's important for congress to reopen the government, to raise the debt ceilings and then to work with the president to addressed our fiscal challenges in a balanced fashion. republican and democrats presidents have universally understood they protect us. the full faith and credit of the united states.
president regan wrote to congress in 1983 and and i quote. the full consequences of the default, we're evening the si reese prospect of default by the itself our impossible to predict and awesome to contemplate. den gration of the pull faith and credit. on the value of the dollar it exchangesed markets, closed quote. >> if congress fails to meet its responsibility, it could deeply damage maintenancetial markets the ongoing recovery and the jobs. i have an unt to be apparent about these risks. and i think it would be a great mistake to dits count or dismiss them. for this reason i've reportedly asked him to take step immediately. >> the treasury department is
rarely updated over the course of the last three months. new information has become available about when we would exhaust our extraordinary pleasures. this is for when we slault or extraordinary measures. the best offings about the urgency with which they should act. and last month i met with a full member with the committee to discuss these issues. continues to borrow money. but at that point we will be left the country with only cash on hand and revenues placing our committee in a a different controversy. it would be impossible for the united states of america to beat all of its obligations,
including social security. payments to our military and veterans and contracts with pry vast sub pliers. we're relying on investors to continue to work. ery week we roll over and $164 billion. if the bonds ener we could understand expectedly dispate our entire cash balance. rying to tight it to the last minute could be very dangerous. if congress does not act and the united states suddenly cannot pay its bills the repercussions can be serious. because congress and congress alone is set to set the maximum amount if government could borrow to meet its fngstial situations. they said it should be put with
cruts and. it has to do with spending the congress has already approved. and bills that have already been incured. failing to make these debt limit would not make the president clear. he will not negotiate over who the should pay its bills. senator members of the house and senate believe there are .ays to control our economy how can the united states choose whether to send social checks to seniors or pay benefits to veterans? how the united states choose whether to provide children of food assistance or their medical providers. there's no way of knowing the irrevocable damage such an approach will have on our economy and our financial
markets. leaders have the responsibility to make our country stronger not to get into crises that increase the federal deficit would soar. the united states has a special responsibility to itself and the world to meet its obligations. the very last thing the u.s. economy needs now is a fight over whether we raise the debt ceiling. not when we face serious challenges both the mystically and internationally that require full attention, and not when we know the kind of damage the financial and economic crisis can cause. thank you, and i look forward to answering your questions. >> i would like to focus a little bit on the concept that some suggest is the way out of this problem, and some suggest
is feasible. and i disagree with, called prioritization. can you just briefly tell us what is the decision you would have to make as treasury assuming interest was paid on ?he debt i know you cannot tell us which ones, nor should you tell us him a social security, medicare, military, farm program, what not, but to go through the process, described with the actual legal and administrative problems and consequences would thatnd include how much would be, my understanding it is 70-80% of the programs could be paid, and what effect it would have on the gross to mystic product. ,alk us through prioritization
please. dash on the gross domestic product. >> we would be fed into meet our obligation, and under any scenario, we would be defaulting on our obligation. there is no plan other than raising the debt limit that permits us to meet all our obligations. the first question is interest and principal on the debt, and as you said, what else question are the legal issues complicated. let me remind everyone, principal on the debt is not something we pay out of our cash flow or revenue. principal on the debt is something that is a function of the markets rolling over. there's a question of what we can do as a government and how the markets function when the government is failing to pay all of its bills. we have never been there, and i think anyone who suggest they know exactly what that means would be projecting after 224
years of the district paying all our bills, what happens if we stop paying all of our bills? on ohio could- possibly choose between social security and veterans benefits, between medicare and food assistance. these are obligations we have made. we wouldn't have the money to necessarily pay our troops in full. if we wouldn't have the money to benefitseterans their in full. our systems were not designed to not pay our bills. our systems were all designed to pay our bills. the legal issues are many. i don't know how you could make the decision. i don't think the legal authorities are clear at all, and i don't think the administrative process would permit the system to work. we write roughly 80 million checks a month. the systems are automated to pay, because for 224 years, the policy of congress and every president is that we pay our
bills. you cannot go into those systems and equally make -- easily make them pay some things and not other things. they were not designed that way because it was not designed to be in the position we would be and if we could not pay all our bills. >> it is my understanding it well that -- what the obligations are. debt, the end of the month, this month, medicare and other bills are due. knowing the revenue is a little bit sketchy, lumpy tom a comes in in unanticipated amounts. case,t is very much the mr. chairman. if these estimates are wrong, then there is the real risk of miscalculation, and i would just note, even in the time that i have been keeping congress informed, we have seen swings in the normal course of things, $20
billion, our estimate of what cash on hand would be. that is not because anybody did anything wrong, it is because quarterly tax receipts are not where they were estimated to be. we are now in an unusual position with the government shutdown. that is having economic consequences that we are just beginning to understand. all the revenue projections we have based our analysis on were based on a world where the government was functioning and where all the services that relate to government activity were happening. it did not take into account any layoffs that might occur, any reduction in payroll, payroll taxes. i have to assume that the estimates before the shutdown are likely not to be an accurate predictor of exactly where we are. >> how do you reprogram the computers? gregg said don't believe there is a way to pick and choose on a broad basis. the system was not designed to be turned off selectively.
-- things itinks a can be done does not know the architecture of our multiple payment systems that were designed properly to pay our bills. they were not designed to not pay our bills. prioritization is just default by another name. it is just saying we will default on some subset of our obligations, but we are still -- the definition is we don't have enough money to pay our bills, we will be in default on our obligations. >> i want to be clear about the administration's does it in on the debt limit. as i understand it, the position is that the president will only accept the so-called clean debt limit hike with no accompanying policy our fiscal consideration for the tax code. i have asked you repeatedly how much of a debt limit increase you would like, and for how long.
is administration position unfortunate, because it is clear and we have a debt ceiling, there is unsustainable spending in our entitlement programs. i believe we can and should use this as an opportunity to address these problems, and i have offered five modest, bipartisan proposals on entitlement reform to the president earlier this year. you have received copies. unfortunate, i have received no responses to that. i sincerely did that, and nevertheless, the administration is entitled to its positions and opinions. i just want to be clear concerning the debt limit. as long as there is nothing attached to a debt limit increase, the administration will say nothing more about it, including its preferred outcomes in terms of how much of an increase and for how long. is my understanding correct, or do you wish to give me particulars of how big of an debt limit increase you would
like to have and for how long you would like to have it, so we can begin discussions and negotiations on this particular issue. >> u.n. i have discussed this on a number of times and corresponded on a number of times. i wrote to you just last week, a few days ago, stating what our view is. our view is that this economy would benefit from more certainty and less brinksmanship. the longer the time is, the better for the economy. is really congress plus decision of how often it wants to vote on the debt limit. i believe that more certainty is better. i think the senate leader and the chairman have put forward a proposal -- >> all i'm asking is how much do you want, and how long? those are two simple questions. how much do you want us to raise, and how long? isthe question of how long one i think i'm answering as clearly as i can. congress isthe
prepared to extend it for is best. the president has tried to be clear in his statement in recent days, if congress passes something shorter -- he is not looking for there to be a crisis here, but congress will be right back dealing with it. the better solution is to go longer. we have tried to be very clear. everyone knows the numbers associated with different periods of time. >> it is not clear to me. a number of things are abundantly clear. between 2009 and 2012, the federal government recorded the largest deficit since 1946, oar tog federal debt to sur the highest at any time in our history except brief time during world war ii. problem of our spending is the government plus major health care programs.
, but medicaidcare and medicare as well. securityds and social [indiscernible] negotiatings to solutions to our entitlement spending problems, all i hear from the administration is that negotiations can only proceed if first come the president is guaranteed yet another tax hike, or if the only spending restraint we have enacted thus far is turned off. so much as even discussing solutions to our entitlement spending program, there are problems. all i hear is that negotiations will only proceed if first we pass a clean continuing resolution and a continuing date -- debt limit increase. they must first get another tax hike or the sequester be undone to get the administration to the
table to talk about entitlement withms which has been met total silence from the administration. furthermore, is a reasonable to say that there can be no negotiations unless there is another tax hike, when we know this very day that disabled american workers face a benefit cut of 20% or more under current earlier.16 or >> i think directors clear that the president has negotiated, has wanted to negotiate, and remains anxious to negotiate on a bipartisan basis to have a fair and balanced approach to dealing with our fiscal problems. >> it is not clear to me. >> he has been on the verge of agreements twice until frankly, it was not acceptable to republicans in congress. he was ready to have an agreement twice, in 2011 at the end of last year. he put in his budget very tough policies that many of the democrats on this committee find very challenging him a because he wanted to make clear he was looking for a balanced approach
to entitlement reform and tax reform, to settle our fiscal matters in a sensible way for the medium and long-term. the president's record on being willing to negotiate is clear. i would wake month -- i would make one comment briefly on the trajectory of our deficit. when the president took office in january 2009, we were in the middle of the worst recession since the great depression. we are in the middle of two wars and we had a deficit of nine percent of our economy. we have cut that in half. we are making progress. it is not fair to say we are in the same place we were. we have made tremendous progress. lew, it seems to me, or in the event of a default or near default, dominoes are going to fall fast and hard. those hit early on will be older people who depend on their own get by.nt savings to either the older people who saw much of their life savings evaporate earring the recession,
and they are struggling just to get those private savings back to the water line, back to where they are. be as specific as you can with respect to what default or near default would mean for those seniors who depend on their private savings. imagine only begin to a retireduld mean to american who relies on social security as their major or sole source of income if we had to tell them their check was going to be late. livedmber my late mother on her social security check. many of us have relatives who lived on their social security check. come, ifeck didn't they did not have the ability to call someone who could help them out, they were in trouble. anything shortks of default -- has never lived on social security.
>> i share your view about those others, but i think the public concern -- you have given comments with respect to mortgages. i am concerned about those retirees and their private savings as well. >> retirees saw their private -- let's talk about not just retirees, but workers have their savings at stake. same, it iss the just more immediate for retirees. we talked during the financial what retireesuced have to live on. it caused anxiety among working people, how are they going to catch up the ground that they lost? where comeat a place because of the resilience of the american people, the recovery of the economy, the good policy decisions made by congress and the federal reserve board, we are in a better place. we have a lot of work to do, but you can see from the economy that people are beginning to feel the economy is moving in the right direction.
if you create a crisis that causes assets to shrink in value, retirees don't have a lot of time to catch up. rights itself over time, for those retirees, they are in a pretty bad spot. i think it is very unfair to have manufactured crises that have a real life impact on working americans and retirees, who ought to be able to worry about market risk, not government policy risk. let's let me ask about the default on the deficit. we know that budget sequestration has not been an , but it hasment produced budget savings that actually accrued to the benefit of the american taxpayer. in the event of a default or near default, is it fair to say that some of those budget savings would be enough to pay
higher interest costs, substantial amounts of which would go to foreign governments ?nd other foreign creditors >> we have seen just this week that for the bills that mature at the end of october, the rates have almost tripled over the last week. we still have access to the credit markets but it's more expensive and for no reason. it could be resolved by just settling this issue and making it clear that the debt limit will not be breached and we will not have any problems. >> what's troubling to me is after the american taxpayer has gone through something of a painful process and you see the savings, in effect, the results of the default would produce higher interest payments and in effect transfer of american wealth from our taxpayers to
foreign creditors. >> i would add that higher interest rates also flow through the economy in terms of higher mortgage rates and higher student loan interest rates. the costs of multiple levels of impact on real people. >> thank you, senator. senator grassley. >> majority leader reid cleaned debt limit increase in to the beginning of 2015 likely be an increase of around $1.3 trillion. my understanding is that it is leaving the debt limit increase up to congress and that you won't negotiate, require a cleaned debt limit increase and will say nothing about its negotiating preferences regarding how long or how much the debt limit increase is desired. with that being the case, if the majority leader cleaned debt limit bill raise the limit for one month and the amended bill was passed through congress, than the president will sign it, i assume.
is that correct? >> i would have to see a bill and the president would have to look at it to say what he would not sign. he made clear that dealing with with this for a longer period of time would be better for the economy but he did not rule out something shorter. we have been very clear about what the right thing to do is. >> both you and president obama have repeated the talking points that negotiating deficit reduction policies on the debt ceiling increase is unprecedented, the debt limit has been used in the past as a means to enact deficit reductions, policies congressional research services since 1978, congress has voted to raise the debt ceiling 53 times, 27 of those, the debt limit increase was tied to the reforms.
i assume you are aware that more often than not, the debt ceiling is raised with other policy or reforms. if you are aware of that history, why do you and president obama continued to use the talkingpoint that negotiating debt limit will is unprecedented when the facts demonstrate otherwise? >> i don't think that is an accurate version of history. it is not what i recall having lived through many of the budget debates over the last 35 years. in the last nine budget limits, only three have them have involved the debt limit. if you look at the budget agreement that did involve the debt limit, in several of them, the debt limit was just added onto a bill.
it was not driving the debate. what i think changed in 2011 was the affirmative case was made in 2011 that a certain faction -- i'm not saying the people in this room -- but a certain faction of the house, if they did not get their way, they would prefer default over a compromise they found unsatisfactory. that is different. we cannot have the debt limit the something that's a threat to the economy unless policy concessions are made. that's not our democratic system works. a minority cannot do that. >> l secretaryew, before i go onto my next question, at least you cannot say it is unprecedented to have negotiations and reforms tied to a debt increase. >> i have never said it's unprecedented for an increase -- it has always been a hard vote for it since 1917, this country has work to turn it into a more ministerial vote. congress used to have to vote on every bond issue and the debt limit was put in place to reduce
the number of times congress had to on debt. in the 1980s -- in the 1970s, we try to turn it into an automatic vote so there would not have to be a boat on the debt limit. two years ago, senator mcconnell put in a mechanism to make it easier to vote on the debt limit. it has always been a hard vote. is it going to be used as a threat to the economy? that cannot be. >> the president has made clear that if we pass a clean cr and a cleaned debt limit extension, he is ready to negotiate. where we need to negotiate is obvious. if you look at long-term protections and spending on health care entitlements demands our attention. in the next 25 years, spending on medicare and a medicaid as a percentage of gdp is expected to nearly double. if i ask you if the president is willing to negotiate on health care entitlements, i think you have already said what the president put in his budget. you are probably going to sites the president's budget. you have already done that. i don't consider that
negotiation. i consider it a restatement of your position. negotiation means you are willing to give serious consideration to the other side's ideas. senator hatch is made numerous proposals on health care entitlements. i am told the message of the 2012 election was that democrats no longer have to negotiate on health issues. can you convince me that is wrong? >> senatorshumer. >> can he answer the question? >> i think the budget reflects the president's openness to entitlement reform. he has been willing to work in a bipartisan basis to do things that are unpopular on the demo craddick side and is looking for a partner who has given take. >> thank you, mr. chairman and
thank you for coming, secretary lew. this hearing as much new did -- much needed. it is about dealing with the debt ceiling deniers. they try to claim that default will not be a big deal and middle-class families will not be hurt, we can just pick and choose which bills to pay, prioritization. the debt ceiling deniers need a dozen debt ceiling reality and you have given them that today. you have said prioritization is default by another name. prioritization is extremely difficult, as you have said. do we pay foreign debts or veterans benefits? do we make sure social security benefits go out or pay medicare, do we pay for education or our troops? american people don't want that. they would want us to pass a clean debt ceiling bill and avoid those awful choices. i would like to talk about the other -- by the way, one of these debt ceiling deniers, a congressman named brown, he said that much of what he learned in medical school relies that came from the pits of hell.
if we are letting people like this lead us, god save america. i would like to deal with the second issue which is the timing. in my view, we are like a blindfolded man walking towards a cliff and if we keep walking in that direction, very soon, we will fall off. we may fall off on october 16 or october 17 or are over 25 or november 1 but we will fall off. the most interesting -- the most important point is we don't know which day we will fall off. the markets are somewhat mystical. they can come to the view that the u.s. will default and anticipate that and treasuries go down in value and interest rates go up much of our financial system freezes and we are back where we were in 2008 when aig failed. i want to ask you this question
to be clear, isn't there a risk almost every single day starting around october 17, even perhaps a day or two earlier, and we can't tell exactly when we will not have enough money to pay our bills and default could occur? even if you laid out the most meticulous plan and the world. >> i have been trying to be as transparent as possible for several months. i very much fear that miscalculation is something that could lead to a very severe consequence. since august, i have been very clear -- we are already on overtime. we hit the debt limit in may. we have been using extraordinary measures. we call them that that everyone assumes they are infinite. they are not infinite. i warned in august that we were going to run out of extra and remeasure sometime in the middle of october and i went a step or
their which mostly has never been done and said we are going to have roughly $50 billion in cash. one month later, based on the year end tax receipts and expenditures, i updated that and said no later than october 17 we would run out of our own capacity and instead of $50 billion, we would have roughly $30 billion. i think that should indicate that what i said at each of these correspondences is true. it's impossible to predict with accuracy. we are talking about in arm as variations in day to day expenses and an economic activity which generates tax revenues. it is impossible to predict with accuracy. it's typical to keep roughly $50 billion in reserve at all times just as a cushion against the unknown. when you talk about having less than $50 billion in drawing it down, that's a dangerous place to be. that's why congress needs to act to raise the debt limit sooner rather than later. >> they would avoid a potential
cataclysm. they should not delay and say we can wait until the eve of october 17 or 19 or october 31, is that right? >> there is a parlor sport in washington of when is the last minute. you cannot do that with the debt limit. if you look for the last minute and you make a mistake, you have done serious damage to the u.s. economy, to the world economy. it's just not responsible. it's reckless. >> would you deal with my analogy of a blindfolded man and we don't know exactly what date we will fall off? >> i have tried to describe it in my own words. >> thank you. you indicated in your beginning remarks that we face a terrible threat to the economy from a manufactured crisis. i understand the fact that the
issue of whether the federal government's borrowing limit should be raised is problematic and faces -- and creates serious concerns with regard to our economy. the fact is, we do face a debt crisis. it's manufactured but we face a real debt crisis. as we hear the discussion about whether the united states is going to lose its good faith and credit, ultimately default, the real crisis is that default. it's the one we are screaming toward because of our refusal to engage as a country. congress and the president, with regard to forming -- to reforming our failed entitlement and tax policy and dealing with the real debt crisis that we face. i think senator schumer's, about the blind man walking toward the cliff is more appropriate with
regard to the debt crisis we face with almost $17 trillion debt. my question to you is -- don't you believe the long-term trajectory of our debt gives our economy a greater threat and gives investors even more concerned in terms of their confidence about the ability of the united states to avoid default? >> we clearly have long-term challenges but i think the financial markets and when you talk to financial policymakers around the world, they see that we have made a lot of progress in the last few years. we have more to do in terms of entitlement reform and tax reform but we have taken a deficit that was nine percent of gdp and brought it in half to four percent. if anything, we are getting criticized around the world for having too much deficit reduction too fast because they want more growth. i agree we should be dealing on a bipartisan basis with sensible balanced approaches for medium and long-term reforms.
i would love to be engaged in that conversation. >> the very progress you are talking about occurred as a result of significant tax increases and the debt ceiling compromise that was breached with the budget control act. the fact is that we have not dealt -- in that compromise, we dealt with discretionary spending almost entirely. we have not dealt with entitlements with the -- which the administration says is off the table but now we have more demands for greater tax hikes. that's what the negotiations we want to engage in are about. >> the president has engaged on multiple occasions. i have been part of those negotiations. we very much believe that a balanced approach where you do entitlement reform and tax reform would be good for the country. we tried in 2011, we tried in 2012 -- we are ready to try again.
the president said when we take away the threat of economic disaster, he is ready to engage. if i heard him correctly in his press conference, he said he would pay for dinner. he is willing to talk and wants to talk but it cannot be with the u.s. economy being threatened if one small part of congress does not get its way. >> so we need another $1 trillion or more of debt the four we can even discuss whether to start reforming entitlements and reforming the tax code? >> what we believe is the government needs to open, congress needs to open the government, and congressman needs to make it possible to pay our bills and we need to engage and we are ready to do that. >> to conclude my questioning back to the issue of our long- term debt and the threat it poses to our economy -- are you telling me those fears have been allied? >> what i tried to say and i hope i was not confusing -- there is a challenge to deal with in the medium and long- term.
it is not the same as a crisis which is what happens if you fail to act on the debt limit in the next short. of time. i would like to do it sooner rather than later and i think it's better for the country and it would've been better for the country if we had been able to to complete the negotiation where the president and speaker were closed until house republicans said they would not vote for it. we would love to be in a place where we were talking about a sensible alternative to these mindless across-the-board cuts. we have been clear about that. it cannot be with the threat that the government is shut down and we will default on our bills. that is not a way to engage in the kind of bipartisan negotiation men need to happen. >> thank you for your testimony about how you think this serious prospect and uncertainty to the market are right now. i guess that is my question to you. everybody is talking about default as if that's the triggering point. this moment could happen at any
time according to your testimony. the reason i brought this chart if you're not involved in the financial markets, it is a mysterious thing. this chart shows the treasury is held in the u.s. by businesses but in europe and china and there is -- it is a network, complicated and complex. it comes to all the individuals involved. it is not just picking up the phone and calling wall street and telling them to settle down. my question is -- i just went on the web and wondered about treasuries and if you google treasuries, it it comes up the most important market indicator, way important than the stock markets, how important a number it is in the economy because of interest rate teeing pegged off its interest rate.
here we are now basically almost talking the interest rate up with the talk in the city in the last 48 hours i can point out this chart because we have seen a dramatic spike from which is more than doubling in 48 hours. if the interest rate on treasury's in the next 48 hours i am, aren't we already to that tipping point? >> i have been trying to careful and report what has happened. i cannot predict what markets will do. i think if you look from last week to this week, a tripling of interest rates on short-term bills is not a good thing. we have seen stability in the long term bond markets but markets are delicate things. i don't know how markets will translate one day's news or actions into discomfort.
i do know that every week we roll over $100 billion of treasury bills. that relies on the market eating open and willing to function. i think everyone has to remember it's not just interest, it is also the principal. the markets have to keep working. >> i think the thing that people are missing in dc is that everybody is at risk in the u.s. economy. it's not just what you just explain that everybody at home. last time, we had this discussion about whether we were going to default or not and the stock are could drop 20%. -- and the stock market dropped 20%. we could have this discussion and by monday, one of my constituents that you could see as much as a 25% drop in the stock market. this is triggered off a treasury so we don't have to go to default. just the talk of default is causing the level of uncertainty we are trying to avoid. >> that's what we saw in 2011.
we had an 11th hour agreement then and we avoided seeing what happens when you cross the line. we had the damage spread we had the drop in the market, we had the higher interest rates and we suffered a downgrade in the u.s. credit rating. that is what happened when we did not cross the line. i don't think any one should want to test what happens when we cross the line. with the government shutdown, we are seeing every day that new things are coming out that are really bad. people thought it was ok to shut down the government and are now rushing to open up one piece or another at a time. it would be reckless to see what happens when you cross the line and don't pay america's bills. >> i think what we are doing is reckless and i hope our colleagues will come together. thank you. >> senator roberts. >> thank you. i don't think we have a blindfold on walking toward a
cliff. i think we are walking toward a cliff with their eyes wide open. that's the problem. all this talk about self- inflicted wounds -- it was not a self-inflicted wound when we raise the debt limit and we also achieved the hollings act, the balance of budget act. it has been referred to by other senators. it gets down to a willingness to really negotiate. [feedback] it's the nsa again. [laughter] the president said over and over again that he will not negotiate but i don't think that's true. there is a meeting as reese week with republican leadership in yesterday he met with democrats. you have been briefed on the agenda of this meeting with regards to the time that the president would defer to an
extension of the debt limit and the agenda, i'm talking about sequester flexibility with the appropriations committee oversight, the repeal of the medical device attacks, the restoration of the 40 hour workweek to the aca as opposed to the 30 hour work week causing all the problem and perhaps even a decision or at least a time frame on a decision on the keystone pipeline. there is a long list that all of us have that we have talked about. senatorcrapo asked specific questions on entitlement reform. that's the real cliff i think we are walking toward. i would only opine to you that why this is so tough, the american people get this. maybe not on the shutdown, although there has been a lot of debate back and forth, but they sure get this on the debt limit.
52% do not want any interest in the debt limit. they get it. they look at this is their own family budget and they understand this. 70 -- 80% say no spending -- no increase without any spend reform and we hear no negotiation. it reminds me of the debate of the paris peace talks in the vietnam era, thus size of the table in the height of the chairs. maybe this morning when the president recently republican leadership and the democratic leadership previously, we could get the high chairs and we will take the low chairs. this is silly. senator schumer said that basically we are walking toward a cliff with a blindfold. i think we have the blindfold off. no action on entitlement reform, no action on tax policy -- i have been to the dinner with
senator isaacson at the white house print it was a privilege. when we talked about how we achieve the grand bargain on tax reform, the president said he needed $800 billion. that prices been raised by the distinguished majority leader to $1 trillion. i don't think you will find much support on the side of the aisle for that. we talked about reform, he said why can't we take mortgage interest and charitable giving and retirement? he gave some specific examples. i tried to put in regulatory reform and i would put that in on the agenda if you agree to it. or if the president would agree to it. we will not do that. we will not test everything in the tax code and we are not going to raise taxes $1 trillion. that's a nonstarter. i hope we can do that.
have you been briefed or what is the up to date news you can give us about the agenda of this meeting as to the time amount and as to what could be on the table? >> the president has been very clear. congress needs to reopen the government and make it possible for us to pay her bills and then he is open to talking about anything. it is not a question of the shape or size of the table. it's a question of whether there is give and take. >> you indicate that the president is willing to negotiate but he is not willing to tell us what agenda or what specific arts of the agenda he might be interested in or not or the timeframe? >> congress has to open the government, congress has to make it possible for us to pay his bills and he is to -- and he is happy to talk about anything. he is clear about what he wants to on in our budget and numerous communications. give and take means everyone coming and doing hard things. he demonstrated his willingness
to do hard things of others are willing to do hard things, maybe we can do something important. >> i am over 13 seconds, i apologize. i think what you are saying is if the government shut down can be discontinued, everybody wants that, i don't want to get into that debate again, but he is willing to negotiate only if we end of the shut down and to an extension of the debt limit and then he may negotiate with an agenda that's just amorphous. >> he has always been willing to negotiate just not with the threat of destroying our economy. >> my colleagues have already expressed a series of dimensions in which both the shut down and the threat of default affect our country domestically economically.
i want to look at a different dimension that has domestic issues. in the other role i play as chairman of the senate foreign relations committee, i worry about the incredibly extremely negative affects the government shut down and the threat of default have on our foreign policy and their national security. both now and in years to come. the shut down and the default affected some of america's near- term foreign-policy priorities such as the president not being able to go to the asian economic summit. his absence although appropriate due to the crisis feeds into existing fears having traveled to the region that our rebalanced asia is more rhetoric than reality. who showed up and was more than willing to fill the void, china. in doing so, america's loss is china's gain.
this is an opportunity about opening markets for u.s. businesses, and to sell products and services, this is an opportunity to promote economic and security questions. i think our allies are going to wonder -- is the united states capable of meeting its promises whether about economic initiatives or security initiatives. perhaps the most damaging and difficult thing to reverse is the impact this has on america's reputation in the world and the economic consequences that flow from that. the entire global financial system depends in large measure on the faith that the united states government can and always will pay its debts. america enjoys the unique privilege of having its currency acts as the world's reserve currency.
it seems to me but playing political games, we give credence to other emerging powers like china and brazil who want the world to become less reliant on the dollar and there are consequences to becoming less reliant on the dollar. not only does that undermine our standing in the global economic system, it puts our dependability in question with allies. in your role as treasury secretary, you fill various international roles. can you give the committee a sense of the consequences at home but there are consequences abroad that affect us here at home. >> i think it would be impossible to overstate the importance of playing the role we do in the world in terms of stability. there's a reason why the dollar is the the reserve currency. the world counts on us being responsible and making the kinds of decisions they can continue to look to washington for that kind of stability. we have finance ministers from around the world gather in washington this week. yesterday, i met with the
finance ministers from africa and latin america. it is challenging when they look at you and they ask what is going on in washington. and makes them nervous about their economies and we need them to have growing demand because that is good for our economy. this question of world reserve currency, it's no secret that there are discussions around the world where others would like there to be a basket of currencies that might be used as an alternative to the dollar. i have to ask the question -- when our role in the world is important to our economic stability and to the world, why would this kind of a manufactured crisis be seen as something that is necessary to pursue when it undermines that? the questions you are asking are quite significant. >> some suggest that is not a real issue because the rest of the world has no place to go. >> i'm not going to speculate
on whether someone else will emerge as an alternative. we are in a place right now where it's important for the united states and the world for us to maintain our position and we have the capacity to do that. we have the economic ability to do that. it's only a medical of lyrical will. >> and there is no reason to risk that possibility, to continue to find out whether there is some other universe of currencies for which people could look to and there is no reason to risk having the potential economic impacts we can have globally that provide domestic opportunities for growth and jobs and opportunities? >> i think there is no reason and i would go further and say it is against their interest to invite that kind of discussion. >> thank you, mr. chairman. mr. secretary, i think this is the 11 time i have been through this discussion about the sky is
falling and the earth will erupt. wyoming families are not buying these arguments. they say that you cannot spend more than you take in. you can't definitely do it for ever and ever. i've got a person that in turn for me several years ago who now is the owner of a major company in wyoming and operates in four states. he pays his people well but every once in a while, somebody comes in and says i need a pay raise. he hands them a copy of dave ramsey's basic look and says you don't have a problem with income, you have a problem with outog. that's what wyoming people think. they are not interested in having their taxes raised so that we can put more people in the wagon. i used an example on the floor the other day of how the private sector are getting upset because government keeps growing and
when it grows, that means there are more people in the wagon and less people pulling the wagon. they are getting tired of it. in fact, it is getting pretty hard to pull. we are not doing anything about it. that's their impression. they can't increase their income, why should we be able to increase our income? how do we solve this problem of outgo? we keep asking for this debt limit increase and it's always asked for as though sometime down the road, we are going to negotiate and figure out a way to solve the problem. you mentioned that you would rather we did not have these manufactured crises. america would prefer that as well. i think this is a manufactured crisis again because we did not work on it yesterday. the shutdown with government, we have not done the budgets the way we are supposed to. we are supposed to start on those on april 15 and do one per
week and not get to this continuing resolution situation on october 1. everybody will know exactly how much they can spend. it does not compress the sequester like it did last year. these discussions -- i was invited to blair house when we were doing obamacare and i spent at day of the president chopping down every suggestion that republicans made. it was a waste of a day. when we hear this thing about willing to negotiate and if you have any ideas get them to me -- it is wearing as thin as the sky is falling. why do you and the president feel we should not be discussing, right now, this dire financial situation and commenting -- and coming up with a solution that will put a little bit of room and ever something to be done right now? if these people are running up
their credit card debt and need to raise their limits, they are expected to say what they will do in order to be able to take care of their debts. they are not real interested because the interest rate goes up and that's the same thing we are facing. you said it has tripled in the last week. we are running into the same problem. why should we not present a solution? it could be a long-term solution. it doesn't have to be a one-week solution. we are not even providing a long-term solution. i put out a penny plan along with sequester that would take care of the debt in two years. not the debt, it would take care of the deficit in two years and result in a balanced budget. some variation on that might be helpful but why do you think the president should not discuss right now and come up with solutions right now in conjunction with the extension of the debt limit? >> the wyoming families know that after they wrap their credit card, they don't get to ignore it.
they have to pay the bill. the debt limit is just paying our bills. you know that i would very much like to be in a conversation about long-term, sensible and settlement and tax reform to give the kind of stability going forward that this country needs. that cannot be done by saying we will not pay our bills next week. that's what's wrong with engaging right now. the president wants to negotiate. >> we keep saying that this terrible thing will happen and this is just paying our bills. how many times can we say that? the public does not get that same option. >> the time to reduce what we need to borrow is when we make the decisions on what we are spending, not after. if congress appropriates the money and puts laws in place for people are entitled to benefits and commits military resources, once those commitments are made,
you cannot tell a contractor who is doing work that i will not pay you because we changed their mind. >> that takes me back to my comment that we should take care of this one at a time. >> the senators time has expired. many senators here have questions to ask. many senators have been good about sticking to the limits. i hope you can stay longer. they will shorten their question so you can stay. >> it will be difficult to go more than five minutes. >> thanks for joining us. i just stepped out of the room for a few months and was watching the hearing on television in an adjoining room. people watching this on tv must be frustrated and disappointed with us. some of the finest people who serve in the senate sirhan this committee and that's why i want to be here. there are people who are willing to be pragmatic and find
compromises. the problem is simple. democrats need to support entitlement reform that saves money, saves these programs for the long haul and is consistent with our obligation to look out for the least. that's what we need to do. republicans need to embrace tax reform that provides certainty and predictability for businesses and investors in this country but generate some revenue. we go back to the four years at the end of the clinton administration where we had for balanced budgets and a row and revenues as a percentage of gross domestic product around 20% all four years. our deficit is down from $1.4 trillion. last year, the deficit was about $700 billion. we cut it in half. it's not enough.
we need to do more. we cannot do more unless we do entitlement reform. over half of our spending is entitlement spending and we cannot do more unless we generate revenues. what we have here is a failure to communicate is part of our problem. we are talking past each other. i talked to people all the time and people have a lot of money and i say they will have to pay more taxes and they say i don't mind paying more taxes but don't waste my money. i don't want to waste their money either. none of us do. tom coburn used to be on this committee and i introduced legislation. it was not to hurt the least of these or the wealthiest of these to help everyone. everyone has gotten a letter from tom coburn to ask as a cosponsor and i hope you will join us. we held a hearing on monday this week on social security disability.
no one wants to harm anyone on disability. one judge in west virginia approved 99.7% of the people who applied for social security disability. 99.7%. that kind of thing is the exception. there are people applying that get approved who can work and don't deserve to be on disability. the idea that we cannot meet our moral imperative and meet a fiscal imperative is a fiction. we can do both. i would say we should not just boost our approval rating but instill confidence in the american people and stuff talk past each other and work with each other. we will meet with the president today. somehow, the president has to make it crystal clear that he's willing to negotiate and i have heard him say it on the entitlement stop. the republicans have a willingness to negotiate on tax reform that generates some
revenues. there is a matter of trust here and i don't know how to break through. any ideas? >> i think the kinds of conversations that he is having are meant to try to rebuild some of the trust and make it clear that once we get beyond where we are right now and once congress reopens the government and takes away the threat of default, he has been and remains open to honorable compromise which means give and take. it has to be a two-way street and that has always been the case with any negotiation. >> thank you, senator. >> thank you, mr. chairman. we have heard a lot from the debt limit deniers about october 17, not really the day we that it they are sure
will not happen since we can pay china and wall street first. the fact of the matter is, the day we run out of our incapacity is a thursday, which happens to be the day the treasury holds its weekly auction. comment on what could happen if that option if we do not raise the debt limit, what would happen, would it substantially increase? what would happen if we are able to roll over the hundred billion dollars in debt? a think the history is clear that anxiety leading up to 2011 caused a bad market reaction. we have seen in the last few days unease, certainly, with maturities in the time between october 17 and immediately after that. i cannot see what the likelihood is of there being a problem. i can say the consequences of any ability to roll over would be quite serious, in terms of a
household budget. instead of having to pay your monthly payment on a mortgage, having to pay the mortgage. that would be a problem. i will be brief, mr. chairman. over the last couple of weeks, i've spent a lot of time just calling people in ohio, community bankers, business executives, entrepreneurs, people running research institutions, some hospital executives, small manufacturers. i don't know their party in most cases, i assume most of them are republicans because they are in lines of work that might suggest that, but over and over they say the same thing. why is this happening? we cannot risk the default. they increasingly understand that it's one faction of one party in one house in one branch of government that has wrought much of this to a halt.
the national association of manufacturers, the largest manufacturing association in the country, wrote on monday>> "the failure of policymakers to address the debt limit is injecting uncertainty in u.s. economy, hampering the ability of manufacturers and the broader business community to compete, and invest, and create new jobs." for the last several years, since the health care act, since dodd-frank, the criticism i hear more than anything from business in my state is uncertainty, uncertainty, when are the dodd- frank rules going to be finished? what's going to happen with implementation of obamacare? all of these. the uncertainty, that pall that they claim hangs over our country, our economy, i hear, and especially from politicians who are critical of many of these programs. so my question is, if we agree to a short-term clean debt limit increase, does that provide the certainty that we would need to compete? >> senator, i've tried to be clear that i think longer certainty would be very good for the economy, and the shorter the period, the less stability it provides. you know, when you talk about
shifting debates to different time periods, retailers are very worried about what happens in november and december if we are going through what we're going through now. so i think longer is better but avoiding a crisis is better than having a crisis. and in no case is the president going to end up in a position where the threat of destroying the american economy is the basis for compromise. he wants that negotiation to be with the basis of the kind of give-and-take that honorable compromises come from. >> this is -- thank you, mr. chairman. this is the worst uncertainty and the most precarious uncertainty i've ever seen in our economy in my time in public office. and what's tragic about it is how self-inflicted it is. thank you, mr. chairman. >> thank you, senator. senator portman. >> thank you, mr. chairman. secretary lew, you've said again today the president won't negotiate on the debt limit. and the president, as was noted earlier, has asserted that there haven't been additional items
added to debt limits in the past. and, as you and i have talked about, and as you know, when you look back at the last 30 years of the history of debt limits, it's the only thing that has worked. in fact, every significant deficit- reduction package that has passed this congress in the last 30 years has come in the context of a debt limit. i found one that didn't. it was in 2005 for about $40 million, a relatively small deal. that's the way it has worked. and it's gramm- rudman, it's the 1990 balanced budget agreement or the andrews air force base agreement. it's the 1997 balanced budget agreement. it's pay-go rules that many in this committee on the other side of the aisle talk about favorably. of course, it's the 19 -- it's the most recent budget control act, just a couple of years ago. all in the context of the debt limit. so my view is kind of strange the president would, one, not want to negotiate, but, two, say we haven't added stuff. it's all that has worked to deal with this. and you indicated this earlier, it only makes common sense because it's a tough vote, as you said.
why? because our constituents don't get it. \get it. you know, why would you extend the credit card again, go over the limit again without dealing with the underlying problem? and that's why, you know, the polling shows that by over two to one the american people say, yes, we should extend the debt limit but only if we deal with the underlying problem. and that's all we're asking for. i'm speaking for myself. i will say we need to avoid a debt limit crisis. but we also need to avoid a debt crisis. so avoiding a debt limit crisis today and avoiding a debt crisis tomorrow should be our objective. the president himself said back in 2006, when the debt was half as big as it is today, $8 trillion, and this was a floor speech, america has a debt problem, and a failure of leadership. he said, i'm therefore going to oppose the increase in the debt limit. he opposed it when it was half as big as it was today. he said we needed to deal with the underlying problem. and in response to senator hatch's question earlier about why the president refuses to deal with the underlying problem, which we all know is that two-thirds of spending and the biggest part of the spending and the fastest-growing part of
the spending that is on autopilot that we don't appropriate every year, which is the mandatory side, in response to that question you said, and i quote>> "he put in his budget significant entitlement spending reforms, he wants to do this." and, in fact, you're right. the president's proposal includes a pretty long list of entitlement savings, mandatory savings, adds up to about $730 billion over 10 years. a step in the right direction. during that time, by the way, we're likely to add another $8 trillion to the debt based on cbo, congressional budget office. but he has got $730 billion over 10 years. now not all of those choices reflect my top priorities, or others on this committee probably, but in a negotiation you don't get everything you want. so my question to you today is really very simple. by adding some of those proposals, maybe not all 730 billion, maybe it's 500 billion, maybe it's 400, but by adding some of the president's own proposals to an extension of the debt limit, consistent with what has been done historically, and consistent with what the american people are asking for, couldn't we move forward and
isn't that what we ought to be doing? dealing, yes, with the debt limit, but also with the underlying problem. and taking the president's own proposals to do it. >> senator, on the history of the debt limit, you and i have been back and forth many times. i think it makes a big difference if you tack a debt limit increase on to something that has already been agreed to. in 1997, the balanced budget agreement was all signed and sealed and then the debt limit increase was put into it. it didn't drive it. nobody threatened default. so i think we're in a given situation since 2011. and that has changed-- >> well, nobody threaten default because you've never had a president saying he wouldn't negotiate. >> and the president has said and has just repeated this week he wants to and is prepared to negotiate. i think it's important not to just go through a president's budget and cherry-pick the things that are hard for him to do. you have to look at the things are hard for others to do, because a negotiation is give- and-take. if everything is on the table, if we're looking at entitlement reform and tax reform in a way that join together to solve the problem, there could be a
serious conversation. but i just would caution to just not take one side of the ledger. >> well, let me focus on that, because the president also says in that budget that he believes we ought to have tax reform. and specifically with regard to corporate tax reform, for the first time in your budget you indicated to be revenue neutral, and i applaud you for that, as you know. i think that's important. i think it's an urgency right now that if we don't deal with it, we're going to continue to lose more jobs in this country. my question to you would be, the president's own proposals on entitlements, i agree there should be a give-and-take, but i'm willing to just say, let's look at the president's own proposals, putting those into this debt limit increase plus directions to the congress on tax reform, as you all have suggested. would you all be willing to move that forward? >> well, just to be clear, the president's view on the debt limit, he has stated as clearly as he can, he's not negotiating over the debt limit. the debt limit -- congress has to make it possible to pay our bills. he looks forward to negotiating. >> senator bennet? senator bennet, you're next. senator bennet. >> senator, i hate to call attention to the time, but i'm
going to be late for another commitment if i-- >> do you have just one more? >> how about two more? two more. >> i think if we do two more-- >> ok, senator bennet. >> jack, this is important, i mean-- >> no, this is very important, senator. >> nothing more important than this. and i want to make sure everybody on our side at least has a chance. >> thank you, mr. chairman. thank you, mr. secretary, for your indulgence. i'll just take a few minutes. in your view, would failing to raise the debt ceiling make our debt and deficit situation better or worse? >> well, it doesn't do anything good. i mean, if the cost of borrowing goes up, it raises our expenditures, it doesn't reduce them. >> and if the cost of borrowing went up just 1 percent or 2 percent, we're at historically low interest rates, what would that cost us? >> you know, i would have to go back and do the numbers exactly to give you an answer. but, you know, these are -- we're talking billions of dollars, we are not talking about small numbers. >> so i think it's -- i mean, it's very clear, and ronald reagan shared this view. you quoted him earlier that this
would just make matters worse. >> yes, it -- unless we were to do something unthinkable and say, we'll never pay those bills. you've got to pay the bills or then you're going to be borrowing money at a higher interest rate, so it only costs. >> which means that our interest costs are just going to continue to go up and our ability to do things like respond to the floods in colorado or be able educate our kids will be diminished. i'm going to let you go because i know you have to go, but i've heard a lot of people on both sides of the aisle today talk about their willingness and their desire to try to meet in the middle, and i think that's important. and i think we need to do that because i can tell you this, people in colorado, they are sick and tired of a lot of things about washington, but what they are mostly sick and tired of is our managing by crisis, and, therefore, our inability to manage the affairs of this country in the way, in this case, that threatens the full faith and credit of the united states and our ability to have the reserve currency for the world be the american
dollar. thank you, mr. secretary. >> thank you, senator. senator toomey. >> thank you, mr. chairman. secretary lew, you've said a couple of times in reference to previous discussions over the debt limit that it's different now. it's true it is different now. i would argue now it's much more urgent that we deal with the underlying fiscal problem. now, unlike in past years, we're spending $3.6 trillion. we've run up a string up unprecedented deficits. the modest improvement you alluded to, you know that's temporary. and it's scheduled, if there's no structural changes, for those deficits to get much worse not terribly far from -- from today. we now have a total debt that's over 100 percent of our total economic output, i believe already limiting economic growth and prosperity. we have trillions of dollars of guarantees that we didn't used to have. we have tens of trillions of dollars in unfunded liabilities. we have large entitlement programs, the largest of which are all growing faster than our economy and, therefore, are on a
completely unsustainable path. so what's different, it seems to me, is our situation is much more dire now than it was in previous discussions. nevertheless, the president is saying, "you give me everything i want, and then we could have a conversation about these things that are important to you." i still find that shocking. but here's -- here's the bottom line, it seems to me. if the president refuses to agree to include even a modest reform that begins to take us in the direction of a more sustainable path in the context of a debt ceiling increase, there appears to be a real chance that this congress will not pass a debt ceiling increase before october 17th. now, i hope that we do pass a debt ceiling increase with appropriate reforms because there's no question in my mind at some point, if we don't raise the debt ceiling, it will become disruptive. as you know, ongoing tax revenue's only about 85 percent of all the money this government
intends to spend in the coming fiscal year. so if we only get 85 percent of everything we intend to spend in tax revenue, the 15 percent shortfall would have to be covered by borrowing, or else we wouldn't be able to pay everything in full and on time. and that would be disrupted. but the greatest disruption by far would occur if you were to choose to not pay interest on our debt. senator cantwell made a very compelling argument about the unique role that u.s. treasury securities play in the world, and for the united states. so my question for you, mr. secretary, as the secretary of the the treasury, are you prepared to assure us, but more importantly, the millions of americans who are investors in u.s. treasury securities and the entire american economy, that under no circumstances will you permit a missed payment on a u.s. treasury security obligation? >> senator, the only way to make sure we can pay all of our
obligations is for congress to act and raise the debt limit. no president has ever had to decide whether to pay some bills and not others. >> i understand. that's a different question, though. >> the law is complicated, and i am not the one who makes that decision, as you know. >> no, i think you would make it. >> if you look -- no, no, it's actually not my decision. it is something that the president would have to decide. and i'm telling you that it would be -- put us into default if it went to a place where we could pay one bill and not others. what would you say to people on social security-- >> i have acknowledged that is very disruptive, and that is not where i hope to go, but i only control one vote in the senate, and the administration controls zero. and they control zero votes in the house. and so it would seem to me the only appropriate thing to do is plan for contingencies. so are you telling me that the president would decide to ensure that we would not miss a payment on treasury securities? >> senator, what i'm telling you is there's no good solution if congress fails to raise the debt limit. and that's why the president's called on congress to raise the debt limit.
you know, you -- you used the number 80-85 percent coverage in terms of revenue. that's an annual average. >> i understand. >> some months-- >> it's uneven. >> -- it's 50 percent. >> that's right. >> so the amount that we fall behind in payments is just unthinkable. congress has to do its job and act. >> and i certainly hope that the president will work with us so that we can avoid this. but, i'm -- i'm -- frankly, i'm shocked that the secretary of the treasury will not assure the financial markets, american investors and savers, and the millions of people who hold treasuries that they don't have to worry about the security of their treasuries. i'm extremely disappointed. >> i -- i would refer you back to statements by president reagan and secretary jim baker, who made the same warnings that i'm making. because only congress can act to raise the debt limit. no president has ever been put in a position of having to figure out what bad options-- >> ok, i understand. i'm almost out of time. >> -- [inaudible] if congress doesn't act. >> on tuesday, the president said, and i quote, "we plan for every contingency. so, obviously, you know, worst- case scenario, there are things we will try to do," end quote. could you tell us about these contingencies? >> well, you know, senator, the the options are all bad.
>> i agree. >> you know, i tried to earlier describe how complicated the federal payment system is. there is no way to make our federal payment system work well to pick and choose what we pay. so we're gonna be in a place which is uncharted territory. and anyone thinks it works smoothly has-- >> it would not work smoothly. it would be chaos. >> the question is whether the treasury is prepared to try to minimize disruption. >> well, obviously, we -- we have looked at many options. there has been, you know, reports indicating things that have been looked at over the years. nobody's ever had to put any of these into effect. they're not tested. >> ok, senator. >> your time has has expired. i'd say -- senators are very patient. i also note there are four senators left who don't ask questions. and if i might ask them, mr. secretary, if they can state their questions in 10 seconds each. and don't -- you won't have to respond to them. >> i'm happy to-- >> ok, right. so -- just for their questions because we don't have time, would be senator casey. >> mr. secretary, thanks very
much for your testimony. my question relates to social security and medicare and veterans' benefits. just going to read two lines from a letter that i got from a constituent, talking about her parents>> she said, "at 85 and 83, they should not have this uncertainty" -- the uncertainty about the impasse -- "these should be their golden years. it breaks my heart to see my mother saying she cannot sleep and has a stomach ache from the worry about where our country is headed." tell us about the -- the impact of the -- the default when it comes to social security, medicare and veteran's benefits. >> senator, i -- i told the senator -- if i could have to answer questions because so many senators have to ask. so, and i appreciate the question. >> i'm happy to follow up at some -- >> ok. next, senator stabenow. >> well, thank you, mr. chairman and mr. secretary. i'd just like to ask that we put in the record the complete letter from the national association of manufacturers and i would read one sentence>> "a default would put upward pressure on interest rates, raising both short and long-term
costs of capital and discouraging business investment and job creation in america." >> thank you, senator. senator nelson? >> 10 seconds. mr. secretary-- >> [inaudible] >> i'm concerned that you have indicated that we might agree to a short-term extension on the debt ceiling and i think that would be counterproductive -- we'd be back in this soup right at -- at the end of that short-term extension. i commend the president for standing firm. we can't negotiate over the debt ceiling. national security is another consideration. i'll put that in the record. thank you mr. chairman. >> thank -- thank you, senator. senator cardin? >> mr. chairman, thank you. secretary lew, thank you for being here and thank you for giving us -- it's our
responsibility to pass the extension of the debt limit. it's congress' responsibility to do this. uncertainty is really hurting this country and we can't govern from crisis to crisis. so, i strongly support your view that the longer term is what we need here. my question would be what legal authority do you have to pick and choose? it seems to me that any analogy we use to a company or business that cannot pay its bills, there's a limit as to the discretion as to how you can make those judgments. i'd be interested as to the legal authority you have on prioritization. >> thank you, senator. other senators are not here, obviously, be able to submit-- >> i'd be happy to-- >> questions to the secretary-- >> [inaudible] >> secretary, you've been very generous with your time. we deeply appreciate it. thank you very much. >> thank you, mr. chairman. >> hearing's adjourned. [captioning performed by national captioning institute]
[captions copyright national cable satellite corp. 2013] [no audio] >> the day began with jack lew testifying before the senate finance committee on what would happen if the u.s. defaults on loans. and if congress fails to increase the debt limit. he concluded with a series of talks. the president sitting down with congressional republicans. the speaker of the house return to the capital. -- capitol. this was the scene. [inaudible]
>> no response from the speaker. our website, no decision reached on the debt limit. is this.tico, there signs of progress. the phone, thank you for being with us. but the days into perspective. most importantly this meeting lasted 90 minutes. it included the president and vice president, and what have we learned? >> it was a good meeting. was an exchange. the president pressed
republicans on why if they're going to raise the debt limit, that they are moving on that path, why they would need to keep the government closed when both sides of agreed to engage in negotiations. house republicans, what seems to be happening, they are talking and figuring out what kind of proposal they will bring back to the president on reopening the government. what strings republicans would attach to do that. the president said he would review their offer whatever they come back with. he is not going to pay ransom. it seems like both sides, republicans mostly, are in the process of figuring out what their ask is. the president will have to doesn't go tooit far in terms of demanding too
much in exchange for opening of the government. the white house is open to certain demands. be one of those things where the white house will not know if it is acceptable until they see it. at this point, i do not think anyone is expecting anything tonight, at least not publicly. perhaps tomorrow there seems to be optimism that this is moving to some kind of conclusion, even though there is unanswered questions. we do not know what kind of support boehner has in his conference, whether republicans will push a longer debt limit extension than what republicans in the house are looking at. everyone agrees there is positive movement. >> we know that the senate is going to be in session on saturday. the senate democratic leader harry reid putting the plan in
place for lawmakers in that chamber to go on a plan that would raise the debt limit to december of 2014. getting beyond the midterm election, something that house republicans are publicly seem unwilling to do, and the white house willing to accept any clean bill. >> it is possible that there are talks going on right now between republicansand some tried to talk with democrats. it is possible talks could overtake that plan to have a vote on a 14 month extension of the debt limit. i would say i would watch out for that. plans could shift in terms of when that happens. if there is progress behind the scenes, that works for democrats and republicans. you could see moving on that.
we do not know where any of these talks are leading. it may be that they will allow boehner if he is moving and coming to a conclusion with this conference, that republicans will allow him to move forward with what he is doing instance of thing over to the senate that they can attach something to that. a lot of moving parts. it isn't unclear where everything will land tomorrow, even over the weekend. >> we showed john boehner as he returned to capitol hill following his 90 minute session with the president. he did not say anything. we did get these dueling statements, who said that the president looks forward to making continued progress with members on both sides of the aisle. he met with senate democrats, and who will meet with republicans tomorrow. and the president and the
leaders agreed to communicate throughout the night and that house republicans are main committed to a good faith negotiation with the president. here is what the house republican leader said this evening as he returned. [inaudible questions] >> we had a very useful meeting. it was clarifying for both sides as to where we are. the take away from the meeting was our teams are going to be talking further tonight. we will have more discussions. you will come back to have more discussions. the president said he would go and consult with the administration, and hopefully we can see a way forward after that. >> comments from the public
and later in the house of representatives, eric cantor. inhe could glean diplomatic speak. they is more positive than have had with house republicans. up until now, it has been perfunctory. the president calling boehner to tell them he will not negotiate. boehner would release a statement that would say the president called me to say he will not negotiate. very uselessatives in this exercise. if that you do not have boehner come to the microphone after the white house meeting was a positive sign. i was standing out there waiting for him to comment. give me the sense that either he wasn't going to make a statement that had a tinge of dissatisfaction to it.
he did a week or two ago after he met with the president. it signal that maybe there was some pregnant -- some progress. clearly it is moving in a more positive direction and we have seen in days and weeks at this point. i think the talks right now are at a staff level. boehner left the capital while those were happening. he may be getting updates by phone. i think for now, it remains unclear. capitol andto the said it was a useful session. that signal something is different about this meeting. >> let me ask you about the story we posted this afternoon. that he may bes forced to accept speaker banners offer.wful -- final
>> estrin was written as -- that was written as john boehner was coming out with the debt increase. we were talking with the white house every day over the past week. that suggests that a short-term debt limit will be acceptable. what this is about is that house republicans were able to agree on anything else but an extension of the debt limit. the president and his advisers -- [no audio] >> we lost the connection. we will try to reconnect with her and get an update on the latest. let's bring you up to speed. there was a meeting with senate democrats. a subsequent meeting with the president. 20 members of the house leadership led by the speaker of the house, john boehner, and
eric cantor, discussions according to the press secretary to the speaker of the house will continue into the night and into tomorrow. the house is going to be back in session tomorrow morning. a weekend session. monday is a federal holiday. congress is back in session on monday and into the week. we want to hear from you on all of this. dale 11 of the government shutdown. -- we move in today 11 of the government shutdown. we are getting your comments on our twitter page preview hashtag is #cspanchat. -- harry reid also spoke to reporters. three minutes after his meeting
with the president. here is what he had to say outside of the white house this afternoon. >> i introduce the president while telling my caucus how proud i was of the strength we have shown in the unity we have shown. after having competed an hour and 45 minutes with him today, i feel the same way. we are here. the government should be open. now, we should be able to pay our debts. we will continue to. we will negotiate on anything. the president confirm that today. >> what you accept [inaudible] a unique form of
legislating. it is our by our. i do not know what is happening in the two hours we have been gone. tos morning there floated the press three different proposals. i assume there is a couple more since then. let's wait and see what the house does. when they send us something, we will look at it as clearly and under the samean determination we have made. open the government. there is so much pain and suffering here. tearjerking to say the least. we want the government open. we want to be able to pay our bills. situation where they do not know what they want. i hope the republicans decide what they want and we will be happy to work with them in any way. i repeat the fourth time right here. open government. let us pay our bills.