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

Partial transcript of Q&A with Sen. Amy Klobuchar (D-Minn.) on the economic impact of debt ceiling brinksmanship before the Joint Economic Committee on Sept. 18, 2013:

Sen. Amy Klobuchar (D-Minn.):

…I want to first touch on this concept that if we just let this go that we’re okay. I guess history for me means something when you look back at what happened in 2011, costing taxpayers $1.3 billion because of the higher yields that had to be paid, and this is in our report. The fact that we had the Dow drop 2,000 points. The fact that we had a credit rating downgraded. From what I heard from these credit rating agencies, we can expect this to happen again at great peril to our economy. Just as you pointed out Dr. Zandi. We have this possibility of actually gaining ground right now vis a vis the rest of the world. And so could you respond to some of the witnesses here in terms of what they’ve said? And I think Dr. Marron also noted that even a small lapse on the debt ceiling in a certain area created some major problems.

Dr. Mark Zandi, Chief Economist, Moody’s Analytics:

Yes, I think the 2011 experience is obviously very instructive. I think the difference between the experience we’re going to go through over the next few weeks and then was then investors really had no roadmap, didn’t have a good sense of how Congress would behave, whether you’d come together at the end and sign on the dotted line. And it came pretty close and it did create a lot of angst and markets fell and confidence eroded, and it’s costing us even to this day in the form of a higher interest rate. In the current context, I think people are and investors are fully anticipating that at the end of the next few weeks when we reach that day of reckoning, when there’s no way for the Treasury to use extraordinary measures to navigate around the limit, that you’re going to act. And that’s why you’re not seeing anything in the financial markets…

Sen. Amy Klobuchar (D-Minn.):

Do any of the witnesses think the President would sign a bill or the Senate would pass a bill that either de-funds Obamacare or delays the funding of Obamacare? Because that’s what’s attached to the House CR – one of them – and then to the right now to the debt ceiling proposal. And so that is my concern when we talk about brinksmanship is that that’s what’s there right now. And I completely understand using a discussion of the debt ceiling as a way to talk about our debt, and I’ve been supportive of the efforts of the Gang of Eight and these other groups and have supported their work and would like to move forward and thought that Speaker Boehner and the President weren’t that far apart in their negotiations at the end of last year which would have meant we would have had a much more long-term approach to debt reduction than the kind of Band-Aid we got at the end of the year. I just want to turn, Dr. Marron, to –

David Malpass, President of Encima Global LLC:

Madam Chairman, you asked what could the Senate do and I think the Senate could respond to the House with alternative versions of spending restraint. The House is looking at it saying, “We don’t want to spend money on this.” And so it’s incumbent on the Senate to come back and say, “Okay, we disagree with that but we’d like to see reductions in spending in this other area” so that you’d get a negotiation process going. The market would respond very favorably to that if your response was one of reasonable offers of spending reduction.

Sen. Amy Klobuchar (D-Minn.):

Well, I think when you look at the CR, there isn’t a set number on the CR and I think negotiations on that number could occur. But the issue is that we’re not even there because of what we’ve been told is we can’t get this bill unless we de-fund Obamacare. I just want to go to one last point here, Dr. Marron, about the business community. You’ve worked with the business community, and I was remembering back in 2011 a coalition of nearly 500 business leaders wrote to Congress and the President urging Congress to put aside our differences and come together for the good of the country and the debt ceiling. The letter said, “A great nation like a great company has to be relied upon to pay its debts when they become due.” And then it went on to discuss the negative effects on business. I personally, as I mentioned, some of our most conservative CEOs sent a letter saying, “I know there may not be an agreement on how to do this. We think this has to be done in terms of the long-term debt. But the debt ceiling is not the place to play games in terms of the effect it’s going to have on our employees and our businesses.” Could you address business concerns?

Donald Marron, Institute Fellow & Director of Economic Policy Initiatives, The Urban Institute:

Sure. Absolutely. The United States federal government has the full capability of paying its bills as it comes due, and we ought to be kind of carry out our obligations to the beneficiaries who are relying on. We ought to be a good business partner to the businesses that rely on us to pay them for the services they provide to the federal government. And we ought to pay our debt on time so we get the lowest possible interest rates and don’t disrupt financial markets. And for all of those reasons, we have the capability, it’s in our interest, and it’s the moral thing to do. For all those reasons, I think we ought to be sure that we pay all our obligations on time.


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