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

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

Sen. Chris Murphy (D-Conn.):
…I look at it from a little simpler level and that’s in terms of making a distinction between policy and process.

When I go to the gas station to go fill up my car with a tank of gas, that’s policy. I’ve made a decision that I need gas in the tank and I’m going to pay for that, and maybe as a consequence, I’m not going to go out and get ice cream with my kids that night.

The process is when I stick the card in the machine to pay for it. That’s not a decision that I make; that’s just the consequence of the decision that I made when I filled up the tank of gas.

I guess, you know, as I listen to people prognosticate as to how this whole thing may play out over the next several weeks, that there’s some suggestion that maybe we will do a continuing resolution and then a couple weeks later potentially aggregate American debt obligations, the hypocrisy to me is just stunning.

Within weeks, we would make a policy decision to spend more than we are taking in and then just a handful of days later essentially refuse to pay bill. The equivalent, I think, of essentially filling up the tank and then driving off.

My question, though, is about what this all means for the flow into the United States of foreign investment?

I was in Europe – I’m chair of the European Subcommittee on the Foreign Relations Committee – I was there earlier in the year, and if you want to feel good about America, go to Europe. They look at the American economy with some degree of envy because they see rates of growth, although anemic, are better than what many of those countries are experiencing. They look at demographic trends that are very positive in the United States compared to the aging populations of Europe. They look with some envy upon our energy sectors where we’re starting to achieve a greater degree of energy independence. And they scratch their heads because the one thing they don’t understand is how based upon that relatively good news, especially as compared to Europe, we haven’t figured out the one thing that stands in our way as Mr. Zandi said and others have said over and over again as our ability to get control of these long-term liabilities.

…If we continue in this sort of cycle of manufactured crisis after manufactured crisis, what does this mean for the flow of foreign investment into the United States? What has it meant already and what can it mean in the future? There is world capital that is looking to find a home and a place, and my question is have our actions over the past several years already had a chilling effect on the amount of foreign investments in the United States and what’s the future if we continue to be trapped in this cycle?

Dr. Mark Zandi, Chief Economist, Moody’s Analytics:
Well, I think the evidence is that it undermines confidence in the ability to pay our obligations and raises the cost of funds and investors are demanding higher interest rates as a result. That’s the evidence that we got from the 2011 event that it has raised interest rates even a small amount but that adds up to a lot of money because we’re talking about trillions of dollars in debt. So it’s incredibly costly.

And the only thing that’s really saved us from an even greater cost is that the rest of the world is in worse shape and that their political and budget issues are much worse than our own.

Sen. Chris Murphy (D-Conn.):
Right, and I guess that’s the context of my question is that given the potential return on investment in other First World or G-20 countries, does that still create an incentive to put money into the American economy notwithstanding the crisis or do we still have a chilling effect above and beyond some relative competitive advantage we have against the rest of the world?

Dr. Mark Zandi, Chief Economist, Moody’s Analytics:
Well, we can’t keep going down this path because presumably the rest of the world is going to get their act together, and then if we don’t, we’re going to have a problem.

Donald Marron, Institute Fellow & Director of Economic Policy Initiatives, The Urban Institute:
…I think the primary risk of the showdown is mostly borne by Americans, particularly if we have a government shutdown or if payments don’t go out. And as Mark says, obviously, if there’s some aspect of this that really weakens confidence in our system if the odds that folks’ capital will be treated well here, it’s clearly a significant risk. But really, I think most of it is about Americans.

Sen. Chris Murphy (D-Conn.):
…I think Dr. Zandi, you’re comment is spot on. We have not maybe borne the full brunt of this because there hasn’t been a lot of safe landings any other place. But to the extent that Europe does make a turn or other places do, that hurts us even more…

Dr. Mark Zandi, Chief Economist, Moody’s Analytics:
Well, actually evidence of that – there’s a couple of economies that have gotten it together. Canada is a good cace in point. Australia is another pretty good case in point. And they’ve benefitted enormously from the capital flows that have come into their country and that’s because they’re on sound fiscal ground and they’re doing the right thing.


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One Comment on “Transcript: Q&A with Sen. Chris Murphy 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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