CNN "State of the Union with Candy Crowley" - Transcript: Government Shutdown and Debt Ceiling

Interview

By:  Jack Lew
Date: Oct. 6, 2013
Location: Unknown

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CROWLEY: Treasury secretary, Jack Lew, is here. Mr. Secretary, thank you so much for coming in.

LEW: Great to be with you, Candy.

CROWLEY: If I can just sort of sum up what you've been saying, and that is come October 17th, you have run out of tricks, although, you don't use that word, but ways that you can sort of massage the numbers to keep it going so that you don't go over the debt ceiling the Congress has set. You need a new debt ceiling by October 17th. What happens on October 18th if you don't get it?

LEW: Well, it's a very good question, Candy. And just to be clear, we crossed the debt limit in May. Since May, we've been creating some room to borrow by using what are called extraordinary measures. They've been used so many times. They're not as extraordinary as they used to be.

Tuesday I wrote to Congress saying I used my last extraordinary measures. I have no more. That means that on October 17th, we'll run out of the ability to borrow. We'll be left with some cash on hand. And, I've told Congress it will be roughly $30 billion.

And $30 billion is a lot of money. But when you think about the cash flow of the government of the United States, we have individual days when our negative or positive cash flow is 50 or $60 billion. So, $30 billion is not a responsible amount of cash to run the government on.

CROWLEY: -- where you're telling me that nothing would happen on the 18th?

LEW: Well, I can't tell you. We never got to this point, Candy, you know? We've never gotten to the point where the United States government has operated without the ability to borrow. It's very dangerous. It's reckless, because the reality is, there are no good choices if we run out of borrowing capacity and we run out of cash.

That will mean that the United States for the first time since 1789 would be not paying its bills, hurting the full faith in credit because of a political decision.

CROWLEY: Let me play you something that Congressman Steve King of Iowa, a Republican said, talking about the possibility of servicing the debt past this deadline.

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REP. STEVE KING, (R) IOWA: I don't think the credit of the United States is going to be collapsed. I think that all this talk about a default has been a lot of demagoguery, a lot of false demagoguery.

(END VIDEO CLIP) CROWLEY: So, the question is, is it technically possible for you to keep up with your debts? Can you not just pay the interest rate on these debts while this is worked out?

LEW: Candy, I got to tell you that anyone who thinks that the United States government not paying its bills is anything less than default hasn't thought about it very clearly. Let me ask you a question. Let me ask you, what happens if we're not able to pay Social Security? What happens if we can't pay disability and veterans payments on time?

(CROSSTALK) LEW: -- Medicare and Medicaid. In each of these cases, it means these families, businesses, institutions that are important won't be getting what they're relying on --

CROWLEY: Coming on the 18th, you won't be able to pay Social Security, you won't be able to pay Medicare, you won't be able to pay all of these things?

LEW: I'm telling that you that on 17th we run out of our ability to borrow, and Congress is playing with fire. If they don't extend the debt limit, we have a very, very short window of time before those scenarios start to be played out.

CROWLEY: Could you keep up on servicing the debt, that is paying the interest on the U.S. debt, therefore, not defaulting as you contend?

LEW: Candy, if the United States government for the first time in its history chooses not to pay its bills on time, we will be in default. There is no option that prevents us from being in default if we don't have enough cash to pay our bills.

CROWLEY: But very often, in bills and correct me if I'm wrong, can you not pay the interest? I'm just trying to figure out wiggle room, because what Republicans are saying, is these guy do this all the time as we run up. Look at Wall Street. It's kind of looking at it. This doesn't seem to be that big of a deal this time around.

No one's been threatening to downgrade the U.S. credit worthiness. So, the question is, is it true, as they say, that you can service the debt beyond the 17th?

LEW: Candy, let me put this in context. We are the strongest, most important economy in the world. We've already seen that when government shutdown, the kinds of gridlock and brinksmanship in Washington hurts people and it hurts the economy. We saw it in 2011. What happened is we approach the point of reaching the debt limit.

You now have people who are saying, oh, it won't be that bad. Well, I challenge them to answer the questions that I asked you. They're willing to concede if we don't pay interest and principal on the debt if that's bad. Well, you know, it is bad, but there are a lot of things that are bad. You can't pay all the bills if Congress doesn't raise the debt ceiling. And none of these bills are new. These are commitment that Congress made that's paying old bills. It would be like somebody saying I ran up my credit card and I decided not to pay it. You can't do that. The United States government is just too important to the world. Our currency is the world's reserve currency.

CROWLEY: Is this -- could the president, is there a mechanism and I think we went through this last time around in 2011. Is there a mechanism for the president should the U.S. be unable to pay its bills? Is he able to unilaterally lift the debt ceiling? LEW: I think the White House has spoken quite clearly to this -- the president does not have the authority to take action in that kind of a way -- the president consulted with his lawyers, and that's the conclusion that he's reached. You know, there's a desire here for there to be some kind of a magic solution.

There's an easy solution, Candy. A majority in Congress would do the right thing if given a chance to vote to open the government. A majority in Congress would do the right thing if given a chance to let us pay our bills. Congress needs to work. They need to do their job, but the majority needs to be given a chance.

CROWLEY: If it is as bad as you say it would be if this happens, if they don't raise the debt ceiling -- Congress doesn't raise the debt ceiling by the 17th, why wouldn't the president come to the negotiating table? If it's going to ruin -- it's going to shake the world markets, if it's going to ruin our credit worthiness, you know, we're the superpower. We can't be not paying our debts. If it's that vital, why isn't he at the bargaining table saying what can we do here?

LEW: Candy, I think you know that the president has been, is, and will always be looking for that way to negotiate to find a sensible middle ground. He did it in 2011. He did it last year. He did it this year in his budget where he put forward tough policies.

CROWLEY: If this is so dire, why not do it again?

LEW: You know, I think if you look at where we are right now, we've just gone through a couple of months where some very extreme parts of Congress to control. I don't think the leadership in Congress wanted a government shutdown. They ended up with a government shutdown because of the tactics of an extreme group trying to say, we're willing to do real damage if we don't get our way.

The president's message is clear. Congress needs to its job. They need to open the government. They need to make us to pay our bills and then new need to negotiate. And he is very much prepared to do that.

CROWLEY: -- the president still won't sit down. I mean, it's like -- it just seems like a duel message here. It's really, really important. Horrible things are going to happen if this isn't fixed, but I'm not going to negotiate.

LEW: You know, Candy, in 2011, there was a very dangerous turn in the political debate in Washington. You had the same 50 to 100 members who were really willing to default if they didn't get their way. I've been through a lot of budget debates. I've been through a lot of debt ceiling debates. Never did I hear people who said if it don't get my way, it's better to default. That's not acceptable now --

(CROSSTALK)

CROWLEY: Let me turn you quickly to the government shutdown, and in particular, you have inside the treasury department, the unit that monitors sanctions and imposes sanctions on those who try to help Iran or Syria militarily. We are now told that that office has been gutted, that it can no longer do its job because of the shutdown. As you know, Congressman Ed Royce, chairman of the House Foreign Affairs Committee wrote you a letter said wait a minute, you said that you certainly would make sure that all vital activities of the government go on.

And then, he said, "This recent staffing decisions leave me puzzled. I respectfully ask that you reconsider these ill-advised staffing decisions that undermine support for vigorous Iran sanctions and other critical national security efforts." It does seem that this fits under the classification of essential.

If the president is going to say Iran came to the table because we imposed and enforced sanctions, why you would let all but 17 members of that 100 plus office be furloughed?

LEW: You know, Candy, there's a simple solution here. Congress needs to vote and open up the federal government.

CROWLEY: But did you have to furlough these people? I understand you want the government open.

LEW: You look around the government, there are people with essential functions who are not coming to work because not everything that meets the common sense test of essential meets the legal test under a government shutdown. These people do very important --

(CROSSTALK)

CROWLEY: -- that the president's ability to carry out foreign policy certainly with Iran who we worry about nuclear weapons --

LEW: I think the work is very important. I think Congress is irresponsible and reckless for shutting the government down, but they also need to understand when they shut down the government down, there are consequences, because we don't have the legal ability to bring everyone back.

CROWLEY: Treasury secretary, Jack Lew, thank you for coming by.

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