Questions And Answers On Washington's Debt Deal
TONY COX, host: This is TALK OF THE NATION. I'm Tony Cox in Washington. Neal Conan is away. Congressional leaders are trying to sell a compromise package for raising the debt ceiling to two wary houses on Capitol Hill. Top Democrats and Republicans hashed out a complicated plan Sunday night that would cut spending and raise the debt ceiling by about $900 billion each.
It is the first of several steps, though, and lawmakers still face a looming deadline to avoid a possible government default. Speaker John Boehner needs to muster 217 aye votes for it to pass in the House, and he is facing rebellious Republicans, as well as liberal Democrats, neither of whom appear inclined to support it.
Senate Democrats, meanwhile, are hoping their majority will be sufficient to carry the day, which is no guarantee, either. GOP support is likely to be needed in the upper chamber, as well. And as the political story unfolds throughout the day, investors and business owners are cautiously watching and asking can the compromise survive and stave off a default, or is it too late given the inability of Congress to get a deal done before the 11th hour, and is a downgrade of the nation's credit rating, the first in its history, now inevitable?
There are a lot of moving parts to this story, obviously. So what do you still not understand? What do you want to know, and what's in the deal, the politics behind it and how it might affect you? Our number is 800-989-8255. Our email address is email@example.com. And you can join the conversation at our website. Just go to npr.org, and click on TALK OF THE NATION.
Later in the program, on the Opinion Page, what's lost when our post office closes. But first we are joined by NPR's senior Washington editor Ron Elving. Ron, nice to have you join us.
RON ELVING: Good to be with you, Tony.
COX: Also in Studio 3A with us is NPR business reporter Tamara Keith. Tamara, nice of you to be with us, as well.
TAMARA KEITH: Thank you.
COX: So Ron, let's talk to you first about this compromise deal. Do you remember the television show "Are We There Yet?"
(SOUNDBITE OF LAUGHTER)
ELVING: I remember the show "Deal or No Deal."
COX: Now that's an even better one. Where are we?
ELVING: Well, we don't quite have a deal yet. We have a proposal for a deal, which has pleased - well, we probably shouldn't go so far as to say pleased - which has satisfied, for the moment, the president and the four congressional leaders, House and Senate, Democrat and Republican.
So they've taken it to their respective caucuses. They are battling it at that level right now. And we could have a vote this afternoon, possibly even fairly soon, in the House of Representatives on this particular proposed deal. If they were to vote on it and pass it, then it is possible the Senate could try to take it up tonight.
It is likely, we have been told, that at least two senators will insist on their right to extended debate, which could be a 30-hour filibuster, to be concluded with a cloture vote sometime Tuesday night. We may get a vote in the Senate sooner than that, but we have to prepare ourselves for that probability.
COX: So we have a thing happening on a parallel track. We have what is occurring on the Hill with regard to both the House and the Senate. Tamara, at the same time, we have the global financial community watching to see what's going to happen. A lot has been made of the default, the possibility of defaulting. What has been the global market reaction to where we are now, and what you think that reaction is likely to be: A, if we do default; and B, if we don't default?
KEITH: And it's important to point out that if we do default, which is a giant if, it likely wouldn't be a default on our interest payments on treasuries. This wouldn't be a default to our creditors. It would be sort of a default to ourselves, at least initially, and that would be less of a concern to the international community. Obviously, it doesn't send great signals or anything.
The Japanese markets overnight were thrilled with the deal, that there was a deal. European markets ended up closing down, and currently, the Dow is down here in the U.S., the markets in the U.S. are down, but it's much more complicated than just the deal or no deal.
We just got some manufacturing numbers that were discouraging, which reminds everyone that this crisis that we're experiencing now is only part of the story. We still have an economy that is struggling, and we're not generating jobs. There are lots of other issues going on that can make the markets jumpy.
COX: We're going to take some calls in a moment, and before I come back to you, Ron Elving, with a question, I have one other one for you, Tamara, it's this: There have been those who have suggested, in public actually, that the August 2 deadline tomorrow is not a real deadline. What's the story with it? Is it a real deadline or not a real deadline?
KEITH: Well, the Treasury secretary will certainly have us believe that it is a real deadline, that they will begin having to make very hard choices if that threshold is passed. But that is not the time at which we would stop paying all of our bills.
They would be able to pay some bills or lots of bills. It's not the Armageddon moment, necessarily, but markets can turn on a dime, and just things that seem bad can make them go nuts or not go nuts.
COX: So to come back to you, Ron Elving, given what Tamara has just described as this sort of amorphous deadline for tomorrow, how is that impacting what is taking place at the moment on the Hill?
ELVING: I would say, not to be cynical, but I would say that another deadline that's affecting the people on the Hill is the fact that their recess is supposed to begin this weekend. And it is probably not entirely an accident that when the Treasury secretary said some months ago that they could move an account here and move an account there and jimmy things around long enough to keep issuing checks and honoring those checks on the United States Treasury until August 2, he was choosing the Tuesday on the last week that Congress was expecting to be in town.
He knew perfectly well that there was going to need to be some kind of deadline and incentive for Congress to take the bitter pill that we are only now beginning to taste that is this proposed deal.
COX: There is a great deal for us to hash out with people, and we're beginning to get folks lining up to talk to us. Our number here at TALK OF THE NATION is 800-989-8255. The email address is firstname.lastname@example.org. So why don't we jump into it, take a caller and see where they take us. This is caller number one. This is John(ph), who is calling us from Sacramento, California. John, welcome to TALK OF THE NATION.
JOHN: Yes, hi, thanks for taking my call. Yeah, my - one, I just wanted to voice my displeasure and frustration that we've been brought to this brink for what looks like a deal that we should have been able to get a month ago.
My question is this: It sounds like when we kept - the president kept coming out and saying we needed to compromise, to share the burden for revenue, which would be tax increases. But in this deal, it's my understanding that there is no revenue and that the trigger that should take place to motivate Congress to actually put something together bipartisan, everyone that mentions it keeps saying tax reform, as opposed to revenue. And I'm wondering are we really talking about a shared burden with this, or are we actually just talking about cutting some subsidies?
COX: John, that's a very good question. Ron, what about that?
ELVING: The cuts that are contemplated by this deal are split basically equally between defense spending and non-defense spending. So one of the sacred cows that's very much on the altar in this deal is the idea that you do not cut into essential defense spending no matter what.
When we go back to when the fascination with the debt really became an obsession in Washington in the 1980s, at that time we were in a big buildup for the military, and the military spending went up every year, even as efforts were being made to in some sense or another cut back the size of the federal government.
So this is something that we've been living with for a generation, and one of the things that's rather eye-opening about this deal is that the spending cuts are going to be divided between defense and non-defense. At the same time, the balance that the president was talking about, and the caller is absolutely right, the president kept talking about more revenue.
Whether that's a tax increase or whether you talk about closing a loophole or eliminating a tax expenditure, it all adds up to more money coming into the Treasury, and that we don't have in this deal.
Some people read the deal to open the door down the road to a deal in a super-committee that is going to be appointed, of 12 members of Congress, that could include some increases in revenue down the road. But there's nothing in this plan that commits anyone to that.
COX: Now, the issue of cuts in defense spending is one that Senator John McCain has said gives him pause with respect to the bill that's currently being considered. As with the first caller, we just got an email from someone asking again the same question about military spending: Do we know - I don't believe I heard this in your answer - do we know to what extent military cuts are built into this?
ELVING: Yes, in the very first phase of these cuts, the government is committing itself to spend less, almost half-a-trillion dollars less, on the military over the next decade. Now, this is not an immediate cut in the sense of people who are currently in uniform being sent home. This is not an immediate cut in terms of taking away some of the benefits that veterans enjoy or the people in the military today enjoy.
Limited as those are, those are not the kind of cuts we're anticipating here. What's going to be cut, one suspects from looking at this and anticipating what Congress and the Pentagon will do in reaction, is that long-term contracts for additional military equipment - and we're talking big things here, aircraft carriers, aircraft systems, things of that nature - are either going to be cancelled or greatly cut back.
And that's why you're hearing from, well, for example Joe Lieberman, who is concerned about the individual members of the armed services but also has a number of major defense contractors there in his home state of Connecticut.
COX: This is TALK OF THE NATION. We are having a conversation about the debt ceiling and trying to answer your questions. Our number is 800-989-8255. The email address, email@example.com. We are joined by Ron Elving and Tamara Keith, who are both staff members here at NPR.
One of the things that Bill Clinton has said is that were he president, he would invoke the 14th Amendment, which leads me to our caller from St. Louis. John(ph), welcome to TALK OF THE NATION.
JOHN: Hi, yes, that was exactly my question. It's been suggested that the president thinks that he cannot use the 14th Amendment emergency power, and I wanted you all to explain that.
COX: Thank you very much for the call. What about that?
ELVING: The president who, after all was a constitutional law scholar at the University of Chicago Law School for a time and is not unfamiliar with the Constitution, has gathered around him a number of people he considers experts on this question and asked is this a viable option, is this something I could actually do.
And of course, you know, Bill Clinton was in some kind of tough spots when he was president, as well, in terms of very similar issues of debt and deficit spending and so on. And he tried to prevail using such means as well, we'll have a partial government shutdown and veto a bill and so forth.
But he didn't try to, you know, stretch the powers of the president into an area that's never been used and a strong interpretation, let us put it that way, of what was meant by the 14th Amendment way back in the Civil War era.
COX: We are taking your questions on the deal to raise the debt ceiling. NPR's Ron Elving, Tamara Keith are helping us answer those questions. What do you want to know about what's in the deal, what it means for you or what happens next? Our number, 800-989-8255. The email address is firstname.lastname@example.org. I'm Tony Cox. Stay with us. This is TALK OF THE NATION from NPR News.
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COX: This is TALK OF THE NATION from NPR News. I'm Tony Cox. It is one day before the Treasury warns the country risks default, and congressional leaders continue to work the Capitol for the votes they'll need to pass the compromise deal.
Leaders in the House say they hope to bring the plan up for a vote this afternoon. In the Senate, Majority Leader Harry Reid said about a half hour ago that he hopes to bring a vote tonight or tomorrow. A yes vote is by no means guaranteed, but momentum, for now, seems to have swung in the direction of a deal.
We are taking your questions at this hour. What do you still not understand? What questions do you have about the deal, the timing, the politics and what it may mean for you? Give us a call, our number 800-989-8255. Or drop us an email, email@example.com.
Our guests are Ron Elving, NPR senior Washington Editor; and Tamara Keith, NPR business reporter. And Tamara, let me come to you because we just got an email in, and this comes from Joe(ph) in Portland, and what he says is: What does the current plan do to the possible idea of a double-dip recession?
KEITH: Well, what this plan calls for is cuts in government spending, and cuts in government spending, economists tell me, will in fact likely slow the growth of the economy. They don't have exact figures at this point, and really it's all pseudo-science anyway - economists, don't call - but what they're saying is that it could lead to slower economic growth, and also that means fewer jobs created.
And just to give you a sense of where you are, the economy is not growing very quickly right now. We just learned that in the second quarter, the economy, GDP grew at a rate of 1.3 percent, and we had a revision downward for the first quarter to just four-tenths of a percent.
Meanwhile, and lots of numbers here, but unemployment is at 9.2 percent, well above even remotely reasonable levels.
COX: Are we getting new numbers on Friday?
KEITH: We are getting new numbers on Friday, and there's not a ton of optimism out there. What the consensus is, and obviously these are huge guesses, but somewhere under 100,000 jobs created last month is what they - economists are thinking.
What they say, though, is that you need at least 150,000 created in a month to stay ahead of population growth. So we are, by all accounts, treading water and trying to keep our nose above it at this point.
COX: Let's talk about America's creditworthiness for a moment. You know, we've all seen those commercials on television where they talk about - with the dog(ph) with the really low number, and you can't, you know, can't borrow any money.
(SOUNDBITE OF LAUGHTER)
COX: So the credit rating agencies and the numbers, the letters, actually, that they've associated with our creditworthiness, what do they mean exactly? And if we go from AAA to AA or A, I mean, what's going to happen, and what does it mean?
KEITH: We're definitely not going to A anytime soon. What it means is - the credit rating agencies, the big ones, have said that they're very concerned both about this possibility of default but also more broadly about the deficit and about our debt-to-economic-growth ratio. It's not very pretty.
And so they have put us on watch. They aren't saying now that the deal is out, whether that changes their feeling about whether or not they would downgrade us or not.
But what a lot of people are saying is that even if we were downgraded to AA+ or whatever it is that we still are the best game in town, as it were. You know, people aren't going to go out and start buying debt from Greece. You know, there are a lot of other countries that still aren't as strong and stable as us, and that makes us more appealing.
COX: Well, it just so happens we have a caller who wants to talk about the downgrade, and I want to give you an opportunity to follow up on that, and Ron Elving, we'll come back to you to talk about more - talk more about what's occurring on the Hill at the moment. Ben(ph) from Pittsburgh, welcome to TALK OF THE NATION. You're on the air.
BEN: Hi, you hear about credit agencies like Moody's and Standard and Poor's but (technical difficulties) who would downgrade, is it government officials? Is it a committee? I mean, who are the people behind it?
COX: Thanks for that. Your line is not really clear. So I'm going to have to let you go. But I think we got his question.
KEITH: I think we got it. I think the question is basically, okay, who are Moody's and Fitch and S&P, and who makes these decisions? These are independent credit rating agencies. They are not government agencies. They come out with these ratings to help investors make decisions, big institutional investors and others.
And they typically have committees that make decisions about these things. They have staff that do a lot of research. But it is a little bit of a black box. It's not like it's a democratic process here. They just make decisions. They don't tell us when it's coming. They don't tell us what it is. But they often do tell us why.
COX: Let me squeeze one more in, Ron, before I come to you. This is Eric(ph) from Newport, Virginia. Eric, go ahead with your question.
ERIC: Hi, good morning. Thanks for taking my call, first of all, Tony, and I appreciate Ron and Tamara for answering questions today. My question is about where all this money's going to come from.
So they pass this debt thing tonight. Tomorrow morning, all of a sudden, there's hundreds of billions of dollars waiting to be put into the coffers and pay off the bills?
ELVING: Not exactly, but in a general sense, a generic sort of sense, if you will, an informal language sort of sense, the expectation that the United States Treasury can go into the credit markets globally and borrow money - and borrow money, I might add, at historically low interest rates, we are paying less for this money than we have paid in a very long time.
The expectation that they can do that as they need to do so is what provides the liquidity that completes every dollar, if you will. Only 60 cents of every dollar the United States government spends is coming in in the form of revenue. We have been hammering down our revenue flow for a number of years.
The economy doesn't help. Lower tax rates have been a factor. We have been lowering tax rates for a number of years. Many people believe that's the best thing for us to do. But at the same time, it does impoverish the revenue stream at some point or another, and we've been experiencing that, especially in these recessionary and post-recessionary times.
So it is necessary every time the federal government spends a dollar for the federal government to borrow those other 40 cents. That's why Treasury has to have the ability to get into the global markets, and that's what is limited by this debt ceiling that was artificially placed by Congress, and that's why Congress is tasked with raising it.
KEITH: So basically our credit limit goes up.
COX: Let's talk about, again Ron Elving, what's occurring on the Hill. There is said to be in this bill a two-part process, the second part involving the creation of this committee. Tell us, if we get to that point, what that committee would consist of, who puts the people on that committee, and what are they supposed to do, and by when are they supposed to do it.
ELVING: Yes, if this deal gets approved this week by House and Senate and signed by the president, then there will be a committee appointed. That committee is going to have a rather heavy responsibility. There will be 12 people on it. They will be members of Congress. They'll be appointed three by the Republican leader of the Senate, three by the Republican leader of the House, similar number of Democrats from House and Senate.
And this even-Steven, six-and-six, two-party, two-chamber committee is going to have to decide how to make another $1.5 trillion in cuts to add to the $900 billion in cuts we've already committed to if we pass this thing this week. And they are going to have to do that or else.
The or else, then, by the end of this year, is that if they haven't come up with something that the two chambers can pass, then we will have sequestration, which is a kind of an automatic, across-the-board percentage cut across everything, with very few things held harmless, although some things will be held harmless.
There will be another round of cuts affecting all the other discretionary funds, all the other forms of domestic spending.
COX: So the presumption is that by putting this group together, even if they can't come together in a bipartisan way, this trigger, which is at their heads, so to speak, will force them to take action that to this point Congress has been unable and unwilling to do.
ELVING: That's right. If you've been watching, you know how well and how easily these two parties and these two chambers cooperate: They don't. So they're asking themselves one more time let's try to do it with this new super-committee. We're going to control them, and then they're going to bring something back to us to vote on House and Senate. And if it doesn't fly, if we can't accept their product, then there will be these automatic, across-the-board cuts.
COX: Let's put this in a historical perspective, if we can, Ron. I know you're the right person to do that because many people have been asking how did we get here, and who are these people that put us in this predicament that we are in, and has this happened before in the history of governance in this country?
ELVING: Well, the debt ceiling was created as part of the World War I borrowing to pay for World War I, 1917. All the years since then, we have had this debt ceiling. And we have frequently, scores of times, hit the debt ceiling and had to raise it.
It's usually done as part of the regular housekeeping and budget business of the Congress, and most of us never have to pay any attention. For many years, they just did it automatically as part of the budget process.
But people who feel that the government has gotten too big and spends too much money and are very upset about the deficit, which I think everyone is upset about, but they are particularly upset about it from the spending side, these people have chosen to make this particular raising of the debt ceiling a kind of donnybrook to say we've got to have a confrontation over this. As long as we raise the debt ceiling, we keep spending money.
So if we don't trust the Congress to close this budget gap, and if we don't trust the Congress to come up with good budget cuts, let's just not raise the debt ceiling anymore. That's why we have this.
COX: But why now? Why right now?
ELVING: Because the debt ceiling has come around again. The gap between the money that comes in and the money that goes out has forced enough more - enough additional borrowing. I mean, this deficit, this debt that we've had, it was $1 trillion in 1980. It tripled to $3 trillion by 1990. It doubled again to $6 trillion. Then it doubled again to $12 trillion. And in the last two and a half years under President Obama, it's grown from 12 to 14, so those last 2 trillion are on his administration. The previous 12 trillion were on all the previous administrations, mostly the administrations from 1980 to 2010.
COX: This is TALK OF THE NATION. We are talking about the debt ceiling issue. I don't know that it would be fair to call it a crisis. Let's just say it's an issue, a controversy. Maybe some would consider it a crisis. If you'd like to get into the conversation, if you have a question that you would like answered by Ron Elving, our NPR senior White House correspondent, or by Tamara Keith - I gave you the wrong title, didn't I, Ron? I apologize for that.
ELVING: I'm a Washington...
COX: You're Washington editor. I put you in the White House - probably you don't want the White House beat at the moment.
(SOUNDBITE OF LAUGHTER)
COX: And Tamara Keith, who are here to answer your questions. Our phone number is 800-989-8255. The email address is firstname.lastname@example.org. Let's take a call right now. This is Sue from Meadville, Pennsylvania. Sue, welcome to TALK OF THE NATION.
SUE: Thank you for taking my call. What is (unintelligible) Social Security? Could someone answer that? In this new budget.
COX: Can you answer that, Ron?
ELVING: The deal does not touch Social Security. In essence, they're just trying to stay away from the Social Security question. If sequestrations should happen -that's that mechanism for across-the-board cuts - if that should happen, Medicare is not held harmless. Now, they're saying they're not going to touch the individual beneficiary's benefits. They would probably hit up the doctors and the providers again. That's the well they always go to. But they are holding harmless Social Security in this deal as we know it.
COX: Another caller. This is Dave from Oklahoma. Dave, welcome to TALK OF THE NATION.
DAVE: How are you doing?
COX: I'm doing fine. How are you?
DAVE: My question is, number one, can you lower the heat in Oklahoma? I guess you can't handle that.
(SOUNDBITE OF LAUGHTER)
DAVE: Ok. One is, if we do raise the debt ceiling once again, what is it going to do to the American dollar on the world market once again? Are we going to go down in the toilet even further, which is going to raise our inflation once again? Or what's going to happen there?
KEITH: Well, the debt ceiling doesn't have any sort of direct correlation with the status of the dollar, so it's unlikely to have a direct effect in any way.
COX: We also have this email. It comes from Sam. He says - what Sam says is: How will the debt agreement affect federal employees? Will they be furloughed or laid off? And what about their benefits? Will they be reduced? I don't know if either of you can answer that.
ELVING: There are no direct layoffs in the deal. On the other hand, if you're going to cut in this short a period of time as possible, over this 10-year span, $1 trillion in spending, there are going to be government contracts that get canceled. There are going to be government agencies that have their budgets cut back. There will clearly have to be fewer people working for the federal government. That's why some people like the draconian nature of this deal, because they feel this is necessary to make the government smaller and make it spend less money.
Now, as far as the benefits of people who are receiving pensions from the federal government or any other form of entitlement - with that one exception of Medicare that I mentioned a moment ago - they are supposed to be held harmless.
COX: We are taking your questions on the debt ceiling. You are listening to TALK OF THE NATION from NPR News. Here's another question. I'll direct it to you, Tamara. And if you're not able to answer, we'll slide it over to Ron. If we cannot pay something - we, assuming - presuming that he means the government - if we can't pay something, who doesn't get paid?
KEITH: Well - and, Ron, correct me if I'm wrong, but I believe that if we were to hit this debt ceiling, if the deal falls apart - which it doesn't look like it would - then the Obama administration would have to choice of who gets paid and who doesn't get paid. It would be - the administration would have the difficult choices to make. But it looks like we are not, at the moment, on a collision course with them.
ELVING: My father is concerned about his Social Security check. I'm sure a lot of other people's parents, a lot of people who are listening to this broadcast, are concerned about their own government check. At this moment, if this deal goes through, it would seem to have the one virtue - it maybe it's only virtue - of relieving the anxiety of those people. But if it does not go through, then decisions will have to be made, and it's pretty clear the Treasury Department does not intend to default on obligations by not paying debt service. We do need to get back into those global credit markets. We won't get in there if we don't pay people their debt service.
So I would suspect that elements of the government will start shutting down, and there may be some delay in the paying of some people's entitled government check, whatever it may be, whatever the source of that check may be. That's why there's a lot of anxiety around Washington these days. And that's why it's important that some kind of deal to raise the debt ceiling get done and get done now.
COX: As we bring this to a close - and this has been really helpful, I think, hopefully, for the audience. I think that they've gotten information that they may not have gotten other places, which leads me to this question: If you have not gotten the answer that we have tried to provide to you or you haven't asked a question, where might a person go to get clear, concise, accurate information about what is occurring?
ELVING: There are a number of government websites. Social Security Administration can provide a great deal of information, and other federal agencies. I also urge people - and I'm not trying to be tendentious here - I urge people to contact their members of Congress and ask them for information about what they should do if there is no debt ceiling increase and if they are depending on the federal government for anything at all.
KEITH: And also, the language of the legislation is now up on the Internet, so people can read it for themselves. And also, the Congressional Budget Office has come out with some scoring and things like that. So there is information up on the Internet if you want to dive in.
COX: Final thing for both of you - do you think that we will be sitting here tomorrow having this very same conversation because nothing will have been resolved by then?
ELVING: I think we'll see a vote in the House today. I think we'll see a vote in the Senate either tonight or tomorrow night. And I believe that the members of Congress have now the reality in their sights of what they need to do.
COX: Do you agree with that?
KEITH: Yeah, but what do I know?
COX: What do you expect?
KEITH: I'm just a business reporter.
COX: What do any of us know about what really is going on? Tamara Keith is business reporter here at NPR. I want to thank her for joining us. Ron Elving, NPR's senior Washington editor. Thank you both. Coming up, Philip Rubio carried the mail for two decades. Now he says we'd lose a lot more than mail if our post offices close. He joins us next on the Opinion Page. Stay with us. I'm Tony Cox. This is TALK OF THE NATION from NPR News.
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