Echoes Of 1995 In Rhetoric On Debt Ceiling

Robert Rubin served as Treasury secretary during Bill Clinton's presidency and was at the helm when the country butted up against the debt ceiling. According to current Treasury Secretary Tim Geithner, the nation will come close to the ceiling once again next month if Congress doesn't raise the borrowing limit. Host Linda Wertheimer speaks with Rubin about his memories of 1995 and whether it could happen again.

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Mr. ROBERT RUBIN (Chairman, Council on Foreign Relations): This whole debate is about a very, very small piece of the budget and is irrelevant with respect to our long-term fiscal position.

LINDA WERTHEIMER, host:

That's Robert Rubin, former Treasury secretary. He was in that job the last time the government shutdown. But Rubin thinks the coming battle over raising the ceiling on the national debt is far more important.

In 1995, a stalemate between President Clinton and congressional Republicans meant that Rubin had to scramble to find ways to keep paying the nation's debts without technically exceeding that limit. And we're almost at that point again.

By current Treasury Secretary Tim Geithner's calculations, the country's debt limit will be reached by May 16th unless Congress increases that limit. And as Robert Rubin reminded me, that's something Congress has done every time it's been asked.

Mr. RUBIN: I personally think that it is unthinkable. I felt this in 1995, and I think this today. I think with all the rhetoric, it remains unthinkable that we will, as a nation, the richest country in the world default on our commitment. So I think in the final analysis, in one way or another, an agreement will be reached that will increase the debt limit.

It may be that it'll take some time as happened in 1995. What happened in 1995 was we got to the date when the federal government's debt hit the debt limit and the Republican majority in Congress was saying to President Clinton, we won't raise the debt limit unless you exceed to our view of what should be done with respect to the budget.

The president was opposed to their view, and it never came down to the dramatic confrontation that would have occurred one minute to midnight because the Treasury Department found a way to borrow fund from the employee pension funds to continue funding the commitments of the federal government. And that borrowing the pension funds was not considered debt for technical purposes. And we continued to do that for several months until finally the Congress increased the debt ceiling and that problem was solved.

WERTHEIMER: You wrote in an op-ed for the Financial Times recently that trying to do the same thing now would be much more difficult. Why is that?

Mr. RUBIN: Well, that's correct. You could do the same thing today, borrowing from the pension funds. The problem is that because the numbers are so much bigger, and there's a limit to how much you can borrow, how much is available, you would - I'm told - I haven't done these calculations myself - but I'm told this could only be done for a much shorter period of time.

In other words, the Treasury will not be able to buy nearly as much time as we were able to buy to have the process sort of heal and have people come together.

WERTHEIMER: We're hearing from a Tea Party freshman that they are thinking of taking a stand on the debt ceiling. Senator Mike Lee of Utah says he'll filibuster any increase to the debt ceiling unless he can see a creditable plan to balance the nation's budget. Do you appreciate the Tea Party's point of view on this...

(Soundbite of laughter)

WERTHEIMER: ...that this has to stop?

Mr. RUBIN: I think that it is absolutely imperative that we deal with our fiscal trajectory, with our fiscal outlook, because I really do think it is -not only is it not sustainable, but I think it is really dangerous. But I absolutely think that the threat of defaulting our debt should not be part of a budget negotiation. That should be off the table, and then the budget negotiation should go on until hopefully the various sides can reach some kind of a reasonable combination.

But whatever may happen in that negotiation, whatever may happen, Linda, what absolutely should not happen is we should not default on our debt. But if we did, it could really have very, very serious adverse consequences on the confidence in our government and our political processes, and as a consequence, the price at which it would cost us to access markets, on our credit markets more generally.

It is, I think, really this is a monumental concern, where it to happen, which I do not believe it will just because I think of the final analysis, even those adamant people will understand the severe consequences of selecting.

WERTHEIMER: Robert Rubin, the secretary of the Treasury under President Clinton.

Mr. Rubin, thank you very much.

Mr. RUBIN: Thank you. It's good to be with you.

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