Transcript: Q&A with Rep. Kevin Brady on the economic impact of debt ceiling brinksmanship before the Joint Economic Committee – Sept. 18, 2013

Partial transcript of Q&A with Rep. Kevin Brady (R-Texas) on the economic impact of debt ceiling brinksmanship before the Joint Economic Committee on Sept. 18, 2013:

Rep. Kevin Brady (R-Texas):

…Does anyone believe the President and the Senate Democrats’ position that we will pass a debt ceiling limit without any checks or balances on spending? Anyone here believe that’s going to happen? Maybe that’s the other flip side of this brinksmanship rhetoric. I appreciate the points that this is – the debt ceiling is one of the few remaining opportunities to restrain the expansion of the federal government. You know, Vice Chairman [Amy] Klobuchar said the same in 2011. Now it’s time to have the vote tied in with getting some progress on a long-term debt of the country. And I think that’s where Republicans and Democrats actually agree going forward. So very briefly, Mr. Malpass made the case that it’s economically important to restrain the growth. So what are the one or two most key elements Congress ought to be focusing on that restraint in that area?

David Malpass, President of Encima Global LLC:

I think it’s useful to have both sides offering their vision of how to restrain spending. So I – you know, there are ample areas. I’ve seen – Sen. Enzi was in New York on Monday and said there were $900 billion of spending restraint that’s available to Congress. We’ve seen in the recent ag[riculture] bill a huge amount of extra spending that’s going out in that direction. So each of these is going to be painful. So I guess my bottom line is that Congress should and is almost required by its responsibility to prioritize spending so that there’s a concept that some of it is less vital than others.

Rep. Kevin Brady (R-Texas):

And you’re thinking both continuing with discretionary funding because there are still spending that’s less of a priority there and as well as the steps we take to make Social Security, Medicare solvent for future generations?

David Malpass, President of Encima Global LLC:

Yes. In yesterday’s CBO numbers they show the rapid growth of entitlements in the out-years. So it would be very market positive if Congress began talking about ways to slow the growth in entitlement spending. It would set the U.S. apart from other countries in its ability to adjust to the aging demographics.

Rep. Kevin Brady (R-Texas):

So the government’s financial outlook is getting worse not better as we sit here today?

David Malpass, President of Encima Global LLC:

Yes. The data – because of the trend path in spending, the debt is going to mushroom and so it’s vital that steps be taken now to find ways to have an open discussion of ways to slow down that growth in spending.

Rep. Kevin Brady (R-Texas):

Thank you. Dr. Mitchell, you take a controversial position that a short-term default would not be nearly as damaging as the consequences of a long-term financial insolvency. I know the House has already passed legislation that takes default off the table, that requires the federal government, Treasury to pay the bonds as they come due in full interest. Looks like we’re getting set to do that again on Friday. You know, do you think that’s one avenue that helps reassure markets in the short-term so that we can actually focus on solving together – Republicans and Democrats – a long-term we have?

Dr. Daniel J. Mitchell, Senior Fellow, Cato Institute:

Well, I don’t think that default is on the table at all for all the reasons I mentioned earlier about nearly $3 trillion of revenues coming in and only about $230 billion of annual interest payments. So unless the Treasury Secretary wanted the U.S. to default, which I’m sure he doesn’t, it’s just not realistic. My argument is that whatever short-term controversy and fiscal mess that Donald was talking about because of the payments for other things other than interest payments on the debt, that would be a relatively small price to pay if at the end of the day we made the reforms that avoided the kind – the truly horrific, catastrophic fiscal problems that you see in European countries that never did have an action-forcing event like a debt limit that enabled them to get control of spending. So are we willing to incur a little bit of headache and hassle and fighting now to avoid a much, much bigger fiscal crisis at some point down the road, and if I knew when that was, I’d be one of these rich Wall Street guys. But all I know is it’s going to happen if we do nothing.

Rep. Kevin Brady (R-Texas):

You’re saying that the most dangerous and risky path is continue the unrestrained spending and ignore the problems with our entitlements?

Dr. Daniel J. Mitchell, Senior Fellow, Cato Institute:

Yes, if you look at the CBO long-run fiscal outlook, it’s very, very clear that the growth of entitlement programs left unreformed will be an enormous burden on our economy. And even if a couple of trillion dollars of revenue just floated down from heaven, that wouldn’t change in my mind the arguments that we need to make Medicaid and Medicare and Social Security more structurally sound with the kinds of reforms that people have been talking about.

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One Comment on “Transcript: Q&A with Rep. Kevin Brady on the economic impact of debt ceiling brinksmanship before the Joint Economic Committee – Sept. 18, 2013

  1. Pingback: Conservative expert downplays need for debt limit increase, claims U.S. won't "default" as long as debt interests are paid | What The Folly?!

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