PBS Newshour 7/12/2011
Excerpts from transcript
SEN. MITCH MCCONNELL, R-Ky. minority leader: The president has presented us with three choices, smoke and mirrors, tax hikes or default. Republicans choose none of the above. I had hoped to do good, but I refuse to do harm.
It's Republicans who are presenting "smoke and mirrors" when they refuse to address the revenue side of a realistic national debt solution.
JAY CARNEY, White House press secretary: The need for the United States to take action so that it fulfills its obligations and pays its debts, as it has in the entirety of its existence, is not a Democratic problem. It's not a Republican problem. It's an American problem.
By fits and starts, the process continues to move forward because, despite elevated rhetoric, the fact is everyone recognizes -- everyone who has been in that room and who will be in that room again this afternoon recognizes that there is no alternative here to taking action and dealing with the problems before us.
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GWEN IFILL (Newshour): So what happens if negotiators don't reach a deal? According to a report by the Bipartisan Policy Center, in August alone, federal spending would immediately be cut by 44 percent. The Treasury Department would be forced to roll over $500 billion in debt. And the U.S. credit rating could very well be downgraded.
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GWEN IFILL: Explain to people who follow this sporadically, just know there's another standoff in Washington, exactly what this prolonged debate is all about.
JAY POWELL, Bipartisan Policy Center: Well, the debt ceiling is kind of an odd provision of law that's off the stage for years at a time, and then it comes on the stage and everything depends on it.
What this really is about is allowing the executive branch to have the money to carry out Congress' spending orders. In our system of government, Congress decides how much to spend and what to spend it on and orders the executive branch to do that. The executive branch is supposed to do that. The executive branch has no independent role to decide which of Congress' laws to obey and which not.
In this situation, the executive branch, the administration will be unable to pay about half of our non-interest bills for the rest of August if the debt ceiling is not raised. And it's an unprecedented event. We have never defaulted on our obligations like that. And the cuts are very, very deep and will affect lots of lots of people around the country if it happens.
GWEN IFILL: And around the world perhaps?
JAY POWELL: Yes. There's a great likelihood that there would be significant market turmoil. You can imagine turmoil in the stock market. You would certainly imagine higher interest rates as we attempt to sell $500 billion in new debt so that we can pay off our old debt.
You can also imagine that a cut of in excess of 10 percent of GDP -- that's what this spending cut is. It's that's big. Ten percent of August GDP is going to have significant effects on our economy. And that will ripple throughout the global economy as well.
GWEN IFILL: There is -- there has been debate at least on another -- let me put this, this way. There are some Republicans who believe that it would not be that big a deal to default, that it has happened before, that it happened over the short term in the 1970s, and that if, if you just pay the interest, the rest of it will catch up.
What do you say to that?
JAY POWELL: Well, there are a couple of strains of that out there.
First, there are some who believe that the Treasury Department has a secret bag of tricks and they can make this all go away. And it's just not true. The administration has been very, very transparent. And the measures that are taken in this situation are quite well-known to insiders in this field.
And they have been used. And they're going to run out of cash on Aug. 2. So, that's not going to happen. So, I say to them that those who say it's not a big deal need to take a look at our study, which they can find on the website of the Bipartisan Policy Center. (Analysis)
You can pay the social safety net, for example. You can pay all of those programs, Social Security, Medicare, Medicaid, food stamps, things like that. If you do that, protect all of the old, the sick and the poor, then you haven't got a dollar for national defense, not a dollar. You also haven't got a dollar for the Justice Department. So there's no law enforcement. You don't have federal prisons. You don't have the FBI.
You haven't got the Bureau of Alcohol, Tobacco and Firearms. And you don't have Pell Grants for students who are going to be going to college. It's August. They're going to be getting their Pell Grants. So the level of disruption, I think, is -- the more we show this study to people, the more they understand it's not an argument against cutting spending or for cutting spending.
It's just the facts are what they are. And people are kind of coming around to that.
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