Transcript: Senate hearing Q&A with Sen. Bob Menendez & Treasury Secretary Jack Lew on the debt ceiling – Oct. 10, 2013

Partial transcript of Q&A between Sen. Robert Menendez (D-New Jersey) and Treasury Secretary Jack Lew on the potential impacts of the failure to raise the debt ceiling. The Senate Finance Committee hearing was held on Oct. 10, 2013:

Sen. Bob Menendez (D-New Jersey):
…In the other role that I play as the Chairman of the Senate Foreign Relations Committee, I’m worried about the incredibly extremely negative effects that the government shutdown and the threat of default have on our foreign policy and our national security, both now and in years to come…

…Perhaps most damaging, and I think, difficult thing to reverse is the impact this has on America’s reputation in the world and the economic consequences that flow from that. The entire global financial system depends in large measure on the faith that the United States government can and always will pay its debt.

And America enjoys the unique privilege of having its currency act as the world’s reserve currency. So it seems to me that by playing political games, we give credence to other emerging powers like China and Brazil who want the world to become less reliant on the dollar and there are consequences to become less reliant on the dollar. Not only does that undermine our standing in the global economic system, it puts our dependability in question with allies…

Could you give the committee a sense of the consequences…abroad that affect us here at home?

Treasury Secretary Jack Lew:
Senator, I think it’ll be impossible to overstate the importance of the U.S. playing the role in the world that we do in terms of the stability we provide. There’s a reason why the dollar is the world’s reserve currency. The world actually counts on us being responsible and making the kinds of decisions that they can continue to look to Washington for that kind of stability.

You know, we have finance ministers from around the world gathering in Washington this week, and yesterday I met with finance ministers from Africa and finance ministers from Latin America, and it’s challenging when they look at you and they ask what’s going on in Washington. It makes them nervous about their economies and we need them to have growing demands because that’s good for our economy.

And on this question of world reserve currency, it’s no secret that there are discussions around the world where others would like there to be a basket of currencies that might be used as an alternative to the dollar.

So I have to ask the question when our role is so important to the United States’s well-being both in terms of security and economic well-being and to the stability in the world, why would this kind of a manufactured crisis be seen as something that is necessary to pursue when it undermines that?

So I think the questions you’re asking are quite significant.

Sen. Bob Menendez (D-New Jersey):
…There are those who suggest, “Oh, that’s not a real issue because the rest of the world has no place to go.”

Treasury Secretary Jack Lew:
You know, I’m not going to speculate on whether someone else will emerge as an alternative, but we are in a place right where it’s important for the United States in the world for us to maintain our position and we have the capacity to do that. We have the economic ability to do that. It’s only a matter of political will.

Sen. Bob Menendez (D-New Jersey):
And there’s no reason to risk that possibility of…to be continuing to find out whether or not there’s some other universe of currency to which people could look to. And there’s no reason to risk having the potential economic impacts we can have globally that provide domestic opportunities for growth and jobs and opportunity.

Treasury Secretary Jack Lew:
I certainly think there’s no reason. I would go a little further and say that it is against our interest to invite that kind of discussion.

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