TREASURY SECRETARY JACK LEW TELLS NPR NEWS CONGRESS MUST ACT ON LOOMING DEBT CEILING
Lew Tells NPR: "At the end of February, we will run out of borrowing capacity, even using extraordinary measures."
Transcript Follows; Audio Available at Approximately 7PM (ET) at NPR.org
February 3, 2014; Washington, D.C. – In an interview airing today on NPR's All Things Considered, United States Treasury Secretary Jack Lew speaks with host Melissa Block about his recommendation that Congress address the debt ceiling before the country reaches its borrowing limit later this week.
The conversation airs today on All Things Considered (find local stations and broadcast times at npr.org/stations); audio will be available at approximately 7:00 PM (ET) at NPR.org. Excerpts and a rush transcript of the full interview follow, and a report is now available at NPR's news blog, The Two-Way.
On how the changing value of "extraordinary measures" makes the February 7 deadline especially pressing, U.S. Treasury Secretary Jack Lew says: "These extraordinary measures have different value at different times of the year, and because we're now at a time of year when there are relatively few things that can be deferred, and an awful lot of bills to repay, particularly tax refunds in February, there will be a much shorter period than people have been accustomed to in the past."
He continues: "Our current estimates are that at the end of February, we will run out of borrowing capacity, even using extraordinary measures. So that means Congress really has a very short window of time – from now until the end of the month – to complete action."
On the roles he sees for the executive and legislative branches in debt ceiling conversations, Lew says: "Never until last year did we actually hear the affirmative case being made to hold out for something that was a demand and a default would be preferable to not getting what you were looking for. That changed the debate, it changed it in a very material way and it changed it so that we can't go back there, we just have to break that habit, and I think we've done that, I think that Congress has come up with a mechanism."
He continues: "It's not just a question about this president and this Congress, we can't be in the place where the question of whether or not the United States pays its bills, is something that every six or 12 months becomes a kind of demand for concessions, because it cannot be a tolerable idea that the United States would not pay its bills."
On the potential effects of another debt ceiling showdown, Lew says: "Frankly, we saw it in October do damage to the economy and we have an economy that's growing and we have an economy that is in almost every area showing signs of real strength. Government should be part of the solution, it should not create obstacles to economic growth and that's what these kind of showdowns do."
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This following is a rushed transcript and may contain errors.
All Things Considered Host MELISSA BLOCK: When will the US Treasury run out of money to pay its bills? Very soon, according to Treasury Secretary Jacob Lew, if Congress doesn't vote to increase the debt ceiling. Congress has suspended the debt limit through February 7th – that's this Friday. Treasury can take extraordinary measures to extend the country's borrowing authority past that, but Secretary Lew says time is short to avoid a government default. And Secretary Lew joins me now from the Treasury Department to talk about that. Welcome to the program.
U.S. Treasury Secretary JACK LEW: Good to be with you, Melissa.
BLOCK: And let's talk first about the timetable. How long do you figure you could use these extraordinary measures to avoid default?
LEW: Well, to be clear, as of February 7th, we will no longer have any more room under what Congress enacted the last time they extended the debt limit, and at that point, what will go into effect are what are known as extraordinary measures. These extraordinary measures have different value at different times of the year, and because we're now at a time of year when there are relatively few things that can be deferred, and an awful lot of bills to repay—particularly tax refunds in February—there will be a much shorter period than people have been accustomed to in the past, and our current estimates are that at the end of February, we will run out of borrowing capacity, even using extraordinary measures. So that means Congress really has a very short window of time—from now until the end of the month—to complete action.
BLOCK: You told Democratic senators last week that the White House would not "pay ransom," I think, were the words that were used, to Congressional Republicans—in other words, you wouldn't agree to concessions in exchange for raising the debt limit. But I want to ask you about that, because back in 2011, the White House did agree to big spending cuts as part of a deal that did lift the debt ceiling. So I wonder if now, looking back, if you would say that was a mistake to tie the two things together, that it now sets a precedent. If you did it then, why not do it now?
LEW: Well, since then, we've seen on a number of occasions that Congress has voted to extend borrowing authority without there being any other kinds of policies being attached to it. Let's remember that just a few weeks ago—at the end of last year—Congress enacted a budget, a two-year blueprint. Just a few days ago, Congress enacted an appropriations bill pursuant to that two-year budget. And now, the question is will we pay the bills that that budget calls to be racked up. I think that the notion that after Congress passes a budget, to then demand additional budget cuts in order to pay the bills that were already incurred, doesn't make any sense.
BLOCK: But that is what the White House agreed to back in 2011 – so would you say that was a mistake?
LEW: No, in 2011 there was no budget in place, in 2011 we were in a point of substantial disagreement on budget policy and I think that if you look at what happened in 2011 and then subsequently last year, we saw the budget limit go to a place where it had never gone before, we were seeing a number of members basically saying that if they don't get their way it would be better to default than to extend the debt limit. That is no way for the United States to run its business and frankly it's not just me saying this, if you look at the leaders of Congress both Democrat and Republican almost all of them are acknowledging that Congress has to act to extend our borrowing auth and that they should do it as quickly as possible and I am very hopeful they are going to do that in a very short period of time.
BLOCK: That does seem to be the message from House Speaker John Boehner, he has said we should not default on our debt, we shouldn't even get close to it - so how are you reading the signals you're getting from the Republican leadership? Does it seem that they're far less hostile to this than they have been in the past?
LEW: I think that everyone went through last October and saw the combination of the government shutdown and the near default caused an enormous amount of economic volatility, it caused an enormous amount of anxiety in the United States and internationally and it is not good, it's something that Senate Republican leaders said afterward they couldn't do it again. You just quoted Speaker Boehner saying better to do it sooner than later, the president has been very clear and it's not just a question about this president and this Congress, we can't be in the place where the question of whether or not the United States pays its bills, is something that every six or 12 months becomes a kind of demand for concessions, because it cannot be a tolerable idea that the United States would not pay its bills. Since 1789 we've always paid all our bills and this Congress has to do what every other Congress has done and make that possible.
BLOCK: I did hear Larry Lindsay speak this morning, the former economic advisor to President George W. Bush, and he spoke after you gave a speech this morning and said look, every president has negotiated with Congress on the debt ceiling, the notion that this is some pure process cut off from any sort of concessions or deal making is a real fiction.
LEW: You know, I think if you look at the some of the examples that have been used, you know, one example that I've heard referred to a number of times is the balanced budget agreement of 1997 - that was not a debate about the debt limit, there was a budget agreement and then it became a vehicle to extending borrowing authority. There were in the past some budget debates that were formed around the debt limit but never until last year did we actually hear the affirmative case being made to hold out for something that was a demand and a default would be preferable to not getting what you were looking for. That changed the debate, it changed it in a very material way and it changed it so that we can't go back there, we just have to break that habit, and I think we've done that, I think that Congress has come up with a mechanism, and they've used it a couple times already now, where they've left it to the president to extend the borrowing authority, they've been able to vote against it. That vote has not had the effect of carrying and the debt limit was raised. There are a lot of things that they've done, at the beginning of last year they extended the debt limit by putting a provision on where they said if Congress didn't pass a budget then Congress wouldn't be paid. So they find ways to do this that don't raise the kind of core policy issues that should not be subject to, as the president said and I have said, kind of ransom-taking - extraneous provisions, even to revisit a budget just a few weeks after you've agreed to a budget. So I think there's a path here where the Congress can go forward, I think that the leadership on both sides knows that it needs to happen and soon, and the sooner the better and I certainly hope we can do it in a way that doesn't have the kind of turbulence that we saw in October. Because frankly we saw it in October do damage to the economy and we have an economy that's growing and we have an economy that is in almost every area showing signs of real strength. Government should be part of the solution, it should not create obstacles to economic growth and that's what these kind of showdowns do.
BLOCK: Of course, every time these showdowns over the debt limit come up, President Obama is confronted with his vote in the U.S. Senate when he voted not to lift the debt ceiling, he talked about shifting the burden onto the backs of our children and grandchildren as something he could not support. So is there some hypocrisy there?
LEW: I think he's already commented on many occasions about that, and where we are today, we're in a period where we've finally reached some regular order, we've seen Congress come together on a bipartisan basis to pass a budget, that's an important thing, come together on a bipartisan basis to appropriate funds for this year and put real policy in place as opposed to going on autopilot, some of that policy is actually giving some important new initiatives a chance to get going, things like early childhood education and funding manufacturing centers. This is a time for Washington to continue to show that the parties can work together and do the business of the American people, I think you saw that kind of progress on the Farm Bill, the Senate will be voting on that this week. The debt limit is something that should just be put behind us, there should be no question that the United States pays its bills and then hopefully we'll be able to work together on things like immigration reform, infrastructure, tax reform, things where there is the ability for the parties to work together.
BLOCK: Secretary Lew, if you look at the long-term prospects here, even though annual deficits are shrinking, the U.S. long-term debt is now over 17 trillion dollars—that's about 73% of GDP. How big a problem do you consider that to be?
LEW: Look, I think if you look at the path that we've taken over the last five years, we've reduced the deficit—cut it in half—we've stabilized the deficit as a percentage of GDP—kept it coming down—and we've stabilized debt as a percentage of GDP. Obviously, there are longer-term issues that the president has spent much time looking at and negotiating with Congress about, but you don't get to the long term if you don't get through the short term in a successful way. In the short term, we're doing very well. We're bringing the deficit down, and frankly, we need to worry more about growing opportunities for Americans to find good, middle-class jobs, because that's ultimately the path towards the strongest fiscal policy. We have time to deal with some of these longer-term issues if there were an environment where you could have a bipartisan, balanced discussion about some of them—the sooner, the better, but it's not urgent that it be this year. Hopefully, we'll make progress on the kinds of things that I described, and progress leads to progress. I think that doing a budget, doing a Farm Bill, doing immigration, if we could move on to things like infrastructure and tax reform—all are very important.
BLOCK: You said "if there were" an environment—how confident are you that there is that environment?
LEW: Well, we've taken a few steps. We've seen a few steps just in these last couple of months. I think, since October, you've seen a strong movement in the Congress to try and get some semblance of regular order and to do business again in a way the American people expect all of us in Washington to get a job done, and that job is growing the economy for middle-class Americans. So I'm an optimist. I actually think that if you look at immigration reform, there's real room for progress. I have never really met anyone on either side of the aisle who doesn't believe in strong infrastructure so we can have a growing economy. Let's get to work on the things we can agree on, and that will hopefully build a path where we can continue working together on even harder problems going forward.
BLOCK: I've been talking with U.S. Treasury Secretary Jacob Lew. Secretary Lew, thanks very much.
LEW: Good to be with you, Melissa.
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