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

Partial transcript of Q&A between Sen. Mike Crapo 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. Mike Crapo (R-Indiana):
…Secretary Lew, you indicated in your beginning remarks that we face a terrible threat to the economy from a manufactured crisis. I understand the fact that the issue of whether the federal government’s borrowing limit should be raised is problematic and creates serious concerns with regard to our economy. But the fact is that we do face a debt crisis. Well, it’s manufactured over decades now. But we face a real debt crisis.

And as we hear the discussion about whether the United States is going to lose its good faith and credit ultimately or going to default, I think the real crisis is that default – the one that we’re screaming towards because of our refusal to engage as a country – Congress and the President – with regard to reforming our failed entitlement system, reforming our failed tax policy in this country and dealing with the real debt crisis that we face.

I think that Sen. Schumer’s comment about the blind man walking toward the cliff is even more appropriate with regard to the debt crisis that we face with a $16 trillion – almost now $17 trillion – debt.

So my question to you is don’t you believe that the long-term trajectory of our debt gives our economy a greater threat and gives investors even more concern in terms of their confidence about the ability of the United States to avoid default?

Treasury Secretary Jack Lew:
Senator, we clearly have long-term challenges. But I think the financial markets and when you talk to financial policymakers around the world, they actually see that we’ve made a lot of progress in the last few years. We have more to do in terms of entitlement reform and tax reform. But we’ve taken a deficit that was 9% of GDP and we’ve brought it in half to 4% of GDP. If anything, we’re getting criticized around the world for having done too much deficit reduction too fast because they want more growth.

I very much agree that we should be dealing in a bipartisan basis – and you and I have talked about – sensible balanced approaches for medium and long-term reforms, and I would love to be engaged in that conversation. But that is not the crisis that we’re talking about…

Sen. Mike Crapo (R-Indiana):
The very progress that you’re talking about occurred as a result of significant tax increases and a debt ceiling compromise that was reached with the Budget Control Act. I mean, the fact is that we have not dealt – and in that compromise, we dealt with discretionary spending almost entirely. We have not dealt with entitlements, which the administration seems to say are off the table. And now, we’ve got yet even more demands for greater tax hikes. And that’s what the negotiations that we want to engage in are about.

Treasury Secretary Jack Lew:
Senator, the President has engaged on multiple occasions. I’ve been part of those negotiations. We very much believe that a balanced approach where you do entitlement reform and tax reform would be good for the country.

We tried in 2011. We tried in 2012. We’re ready to try again. The President said when we take away the threat of economic disaster, he’s ready to engage. If I heard him correctly in his press conference the other day, he said he’d pay for dinner. So he’s willing to talk, wants to talk but it can’t be that it’s with the U.S. economy being threatened if one small part of Congress doesn’t get its way.

Sen. Mike Crapo (R-Indiana):
So we need another trillion dollars or more debt authorized before we can even discuss whether to start reforming entitlements, whether to start reforming the tax code?

Treasury Secretary Jack Lew:
Senator, what we believe is the government needs to open. Congress needs to open the government. And Congress needs to make it possible to pay our bills, and we need to engage. And we’re ready to do that.

Sen. Mike Crapo (R-Indiana):
…Back to the issue of our long-term debt and the threat that it poses to our economy. Are you telling me that those fears have now been allayed?

Treasury Secretary Jack Lew:
No, Senator, what I try to say in – and I hope I wasn’t confusing – there’s a challenge to deal with in the medium and the long-term. It is not the same as a crisis, which is what happens if you fail to act on the debt limit in the next short period of time. I would very much like to do it sooner rather than later. I think it’s better for the country. It would have been better for the country if we have been able to complete the negotiations when the President and the Speaker were very close until House Republicans said they wouldn’t vote for it. And we would love to be in a place where we’re talking about a sensible alternative to these mindless across-the board cuts. We’ve been very clear about that. But it can’t be with a threat that the government shut down and we’re going to default on our bills. That is not the way to engage in the kind of bipartisan negotiations that need to happen.


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