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

Partial transcript of Q&A between Sen. Chuck Grassley (R-Iowa) 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. Chuck Grassley (R-Iowa):
Secretary Lew, Majority Reid – a clean debt limit increase into the beginning of 2015 would likely be an increase of around $1.3 trillion. But my understanding of the administration’s position is it is leaving the debt limit increase entirely up to Congress, that you won’t negotiate, require a clean debt limit increase and will say nothing about it – negotiating preferences regarding how much or how long the debt limit increase is desired.

With that being the case, if Majority Leader Reid’s clean debt limit bill were amended to raise the limit for the month and the amended bill were passed through Congress then the President will sign it, I assume. Is that correct?

Treasury Secretary Jack Lew:
Well, Senator, I’d have to obviously see a bill and the President will have to look at it to say what he wouldn’t sign. The President made clear that he thinks dealing with this for a longer period of time would be good for the economy but he did not rule out that doing something shorter if that’s what Congress does. I think we’ve been very clear about what we think the right thing to do is.

Sen. Chuck Grassley (R-Iowa):
Both you and President Obama have repeated the talking point that negotiating deficit reduction policies on the debt ceiling increase is unprecedented. The debt limit has been used in the past as a means to enact deficit reduction policies. I quote Congressional Research Service: “Since 1978, Congress has voted to raise the debt ceiling 53 times – 27 of those or 51% the debt limit increase was tied to other reforms.”

I assume you’re aware that more often than not the debt ceiling is raised with other policy or reforms. If you’re so aware of that history, why do you and President Obama continue to use the talking point that negotiating on a debt limit bill is unprecedented when the facts demonstrate otherwise?

Treasury Secretary Jack Lew:
Well, Senator, I don’t think that’s an accurate version of history. It’s certainly not what I recall, having lived through many of the budget debates over the last 35 years. If you look at the last 9 budget agreements, only 3 of them have involved the debt limit. So it’s not the case that most budget agreements involve the debt limit. If you look at the budget agreements that did involve the debt limit, in several of them, the debt limit was just added on to a bill; it was not driving the debate.

What I think changed in 2011 was the affirmative case was made in 2011 that if a certain faction – and I’m not saying it’s the people in this room – but if a certain faction in the House did not get its way, they would prefer default over a compromise that they found unsatisfactory. That is different. It is just different. We cannot have the debt limit be something that’s a threat to the economy unless policy concessions are made. That’s not how our democratic system works. A minority can’t do that.

Sen. Chuck Grassley (R-Iowa):
…At least you can’t say that it’s unprecedented to have negotiations and reforms tied into a debt increase.

Treasury Secretary Jack Lew:
I have never said it’s unprecedented for a debt increase to be tied to action. The debt increase has always been a hard vote. Since 1917 this country has been working to try and turn it into a more ministerial vote. Congress used to have to vote on every bond issue. The debt limit was put in place to reduce the number of times Congress had to vote on debt.

In the 1970s when I was working for the House Speaker, we tried to turn it into an automatic vote so there wouldn’t have to be a vote on the debt limit.

Just two years ago, Sen. [Mitch] McConnell put in a mechanism try to make it easier to vote on the debt limit.

It’s always been a hard vote. The question is is it going to be used as a threat to the economy, and that can’t be.

Sen. Chuck Grassley (R-Iowa):
Secretary Lew, the President has made clear that if we pass a clean CR and a clean debt limit extension, he’s ready to negotiate. Where we need to negotiate is obvious. If you look at long-term projections, spending on our health care entitlement demands our attention. In the next 25 years, spending on Medicare and Medicaid as a percentage of GDP is projected to double nearly. Now, if I ask you if the President is willing to negotiate on health care entitlements, I think you’ve already said what the President put in his budget, you’re probably going to cite the President’s budget. You’ve already done that. I don’t consider that negotiation. I consider that a restatement of your position. Negotiations means you’re willing to give serious considerations to the other side’s ideas. Sen. [Orrin] Hatch has made numerous serious proposals on health care entitlement. I’m told that the message of the 2012 elections was that Democrats no longer have to negotiate on health issues. Can you convince me that that is wrong?

Treasury Secretary Jack Lew:
Senator, I think the President’s budget does reflect his openness to serious entitlement reform. He has been willing to work on a bipartisan basis to do things that are unpopular on the Democratic side, and he’s just looking for a partner to work with who’s willing to have some give and take and not just one way.

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