WEBVTT - Bill Hoagland on Debt-Ceiling Negotiations 0:00:12.760 --> 0:00:16.200 Hello, and welcome to the Votes and Verdicts podcast, hosted 0:00:16.239 --> 0:00:20.200 by the policy and litigation team at Bloomberg Intelligence, the 0:00:20.280 --> 0:00:25.280 investment research platform at Bloomberg LP. This podcast series examines 0:00:25.320 --> 0:00:29.680 the intersection of business policy and law. I'm Done Right 0:00:29.960 --> 0:00:34.120 and a analysis with Bloomberg Intelligence covering government healthcare policy. 0:00:34.560 --> 0:00:36.559 And my name is Nathan Dean and I'm an analyst 0:00:36.640 --> 0:00:38.760 with Bloomberg Intelligence covering financials policy. 0:00:39.760 --> 0:00:42.360 So our topic for today is you may have heard 0:00:42.360 --> 0:00:45.160 about it, the debt ceiling, and if you've been around 0:00:45.240 --> 0:00:48.680 DC long enough, you know that this is that sequel 0:00:48.680 --> 0:00:51.879 we wish lawmakers would stop making. But we're lucky to 0:00:51.920 --> 0:00:55.040 have Bill Holand, Senior Vice President of the Bi Partisian 0:00:55.200 --> 0:00:59.840 Policy Center, a nonprofit think tank that engages Republicans and 0:01:00.120 --> 0:01:04.240 Democrats to promote bipartisanship and policy development, to discuss this 0:01:04.319 --> 0:01:08.000 important topic. When we decided to move forward with a 0:01:08.040 --> 0:01:10.880 podcast focused on the debt ceiling, Bill is the first 0:01:10.880 --> 0:01:13.800 person who came to mind. I've seen and heard Bill 0:01:13.880 --> 0:01:17.919 talk about the country's fiscal situation and healthcare financing many times, 0:01:17.920 --> 0:01:20.880 and I've learned a lot from those conversations. So I'm 0:01:20.920 --> 0:01:26.200 looking forward to today's discussion. Just briefly, prior to the 0:01:26.240 --> 0:01:29.959 Bipartisan Policy Center, Bill spent thirty three years in the 0:01:29.959 --> 0:01:33.440 federal government, including as a staff member for Senate Majority 0:01:33.560 --> 0:01:37.720 Leader Bill Frist, as a director for the Senate Budget 0:01:37.760 --> 0:01:42.280 Committee under Senator Pete Diminici of New Mexico, and at 0:01:42.360 --> 0:01:46.560 Department of Agriculture and the Congressional Budget Office. And prior 0:01:46.600 --> 0:01:51.240 to joining the BBC in September twenty twelve, that Bill 0:01:51.320 --> 0:01:54.680 was the vice president of public policy for SIGNA. So 0:01:54.760 --> 0:01:58.600 with all that, Bill, welcome to the Votes in Verdicts podcasts. 0:01:58.920 --> 0:02:00.400 Thank you, Dwayne. Good to be with you. 0:02:01.560 --> 0:02:03.800 So Bill, can you tell us how you came to 0:02:04.120 --> 0:02:07.680 join the BPC and maybe more about what the PPC 0:02:07.960 --> 0:02:10.400 is and the work you're doing to educate people about 0:02:10.560 --> 0:02:12.200 debt and deficits. 0:02:12.919 --> 0:02:16.760 Sure, thank you, Dwayne. We had I had a saying 0:02:17.000 --> 0:02:20.800 on the that once you worked for a United States senator, 0:02:20.840 --> 0:02:24.280 you work for him for life. And as it turns 0:02:24.320 --> 0:02:28.560 out that once I had left the hill, as you 0:02:28.639 --> 0:02:32.359 had mentioned, Dwayne, I worked for Senator Majority Leader doctor 0:02:32.400 --> 0:02:34.679 Bill Frist, and I also worked for Senator P. P. 0:02:34.880 --> 0:02:35.359 Dominici. 0:02:36.120 --> 0:02:38.800 Both of them had a term limited or left the 0:02:39.080 --> 0:02:42.280 left the hill themselves. Senator Dominici was here at the 0:02:42.320 --> 0:02:47.480 Biparson Policy Center, as was doctor Bill Frist as consultants 0:02:47.480 --> 0:02:52.440 here at BPC, and both of them I had left 0:02:52.440 --> 0:02:57.200 the hill, and as I I had taken this position 0:02:57.880 --> 0:03:02.200 with the SIGNA as you mentioned, which was a very 0:03:02.360 --> 0:03:05.399 trying time because this is when the Patient Protection Affordable 0:03:05.400 --> 0:03:08.720 Care Act was coming into existence, and it was really 0:03:08.760 --> 0:03:11.320 like a fire hose and I was hoping for a 0:03:11.360 --> 0:03:15.400 little bit less fire hose type job after coming off 0:03:15.440 --> 0:03:20.320 I rather technic hill. But anyway, long story short. Both 0:03:20.360 --> 0:03:26.280 Senator Brist and Senator Dementia and one other former boss 0:03:26.320 --> 0:03:32.200 a very early in my career, long time doctor Alice Rivlin, 0:03:32.200 --> 0:03:34.600 who was the first director of CBO, she was here 0:03:35.120 --> 0:03:37.400 also working, and they all asked me to come over 0:03:37.440 --> 0:03:42.960 here to resolve. At that time was a dispute between 0:03:43.280 --> 0:03:45.880 our economic team and our health team over a particular 0:03:45.880 --> 0:03:49.240 policy issue. Asked me to come over help work it out. 0:03:49.320 --> 0:03:50.960 And I was only going to be here a year 0:03:51.000 --> 0:03:54.240 and now it's going on about it. So that's how 0:03:54.280 --> 0:03:59.840 I came here. And yes, VPC said role is as 0:04:00.080 --> 0:04:03.560 as its name would imply, is trying to find in 0:04:03.600 --> 0:04:08.880 these very difficult day and age solutions to some of 0:04:08.920 --> 0:04:13.720 these difficult issues. We face that in a by Parson 0:04:13.760 --> 0:04:16.400 way because we truly believe, and I believe from the 0:04:16.440 --> 0:04:19.000 years of experience on the Hill, that the best policy 0:04:19.040 --> 0:04:22.160 is that policy has done in a Biparson way, and 0:04:22.520 --> 0:04:25.120 no better place than to it try to continue to 0:04:25.160 --> 0:04:27.400 practice that than the by Parson Policy Center. 0:04:28.800 --> 0:04:32.159 And we have slit government right now which requires a 0:04:32.160 --> 0:04:35.960 lot of bipartisanship to address some of our key issues. 0:04:36.640 --> 0:04:38.640 One of them is debt ceiling. Can you give us 0:04:39.040 --> 0:04:42.440 a three second version of what the debt sealing is? 0:04:42.480 --> 0:04:44.080 In white matters? 0:04:44.760 --> 0:04:45.719 Sure, the. 0:04:48.040 --> 0:04:53.920 Country has a statutory in law, written in the law, 0:04:54.480 --> 0:04:57.120 a limit on the total amount of outstanding dead it 0:04:57.160 --> 0:05:00.240 can have at any one time. And that law law 0:05:00.680 --> 0:05:04.599 is right now about thirty one point four trillion dollars. 0:05:04.600 --> 0:05:08.000 It is thirty one point four trillion dollars. What that 0:05:08.120 --> 0:05:12.480 number is is the accumulation of deficits from the beginning 0:05:12.520 --> 0:05:16.200 of the republic, offset by any surpluses over there is 0:05:16.240 --> 0:05:19.080 from the beginning of the republic to today. That's the 0:05:19.120 --> 0:05:21.960 amount of deficits. If you like that, we have run, 0:05:22.080 --> 0:05:25.440 as I say, offset by any surpluses, and the accumulation 0:05:25.680 --> 0:05:28.120 of that over the history of this country is now 0:05:28.200 --> 0:05:30.719 up to thirty one point four trillion dollars, and that's 0:05:30.800 --> 0:05:37.719 written into law. Congress has to pass another law to 0:05:37.880 --> 0:05:40.680 change that number. And we have reached that point thirty 0:05:40.720 --> 0:05:45.120 one point four trillion dollars back in January, and as 0:05:45.120 --> 0:05:49.080 a consequence, we now have this standoff because to pass 0:05:49.160 --> 0:05:53.760 that pass that legislation obviously requires Congress in the House 0:05:54.000 --> 0:05:57.159 and the Senate and the present agreeing to a law, 0:05:57.320 --> 0:06:00.320 signing a law in place. It's made even more difficult 0:06:00.400 --> 0:06:07.560 by the fact that very tight House margins the Speaker 0:06:07.640 --> 0:06:10.800 McCarthy has to deal with. Is also made difficult by 0:06:10.800 --> 0:06:13.240 the fact that in the United States Senate, as you know, 0:06:13.360 --> 0:06:17.640 doing that legislation would be subject to the filibuster rules. 0:06:17.720 --> 0:06:22.000 They need sixty votes in the Senate to raise that 0:06:22.040 --> 0:06:25.680 statutory debtline. So that's where we are today. We've reached 0:06:25.720 --> 0:06:28.960 that limit. We are now in the process of at 0:06:29.040 --> 0:06:34.320 least having discussions at the White House earlier this week, 0:06:34.360 --> 0:06:39.000 and we'll have discussions tomorrow and staff are starting to talk, 0:06:39.040 --> 0:06:41.159 which is a good news. But we are in a 0:06:41.279 --> 0:06:45.880 very tight situation now where we might reach that limit 0:06:46.520 --> 0:06:49.520 after all other measures have taken into effect that we've 0:06:49.600 --> 0:06:53.560 used to make room under the cap to pay our bills. 0:06:53.839 --> 0:06:58.520 But come sometime here early in June possibly, or and 0:06:58.720 --> 0:07:02.920 we can get into that later. We do need to 0:07:02.960 --> 0:07:06.360 pass a law that raises that limit, otherwise the United 0:07:06.400 --> 0:07:09.840 States government would default for the first time in its history. 0:07:10.800 --> 0:07:14.880 Do you think the June one date that Secretary Yelling 0:07:15.000 --> 0:07:19.040 laid out a couple of weeks ago is close to 0:07:19.280 --> 0:07:22.680 the X state or does the BBC absence of what 0:07:22.720 --> 0:07:26.200 the X state might be other than June one X state. 0:07:27.240 --> 0:07:30.720 Yes, I think, first of all, we don't say June one. 0:07:31.480 --> 0:07:34.600 We've done our analysis earlier this week and put it 0:07:34.640 --> 0:07:39.040 out and we are continuing updating that. This is a 0:07:39.080 --> 0:07:43.440 difficult estimate to make, largely because it's all predicated upon 0:07:44.360 --> 0:07:48.240 expenditures going out and revenues coming in, and that can 0:07:48.320 --> 0:07:53.960 vary dramatically. But we do see in the numbers and 0:07:54.000 --> 0:07:57.080 we know what's going to happen. As an example, first 0:07:57.120 --> 0:08:00.320 of June, there will be a forty seven billion dollar 0:08:00.400 --> 0:08:05.560 Medicare payment, a twelve billion dollars civil service military retirement payment, 0:08:05.880 --> 0:08:10.120 do twelve billion dollar veterans benefits, and then the next day, 0:08:10.160 --> 0:08:12.760 on June the second, there will be a twenty five 0:08:12.800 --> 0:08:18.080 billion dollars security payment going out. All that suggests to 0:08:18.160 --> 0:08:21.000 us that we're going to have some major outflows and 0:08:21.080 --> 0:08:24.360 hopefully there's cash in the bank, so to speak, to 0:08:24.400 --> 0:08:29.440 cover those benefits, but we have to we don't know 0:08:29.960 --> 0:08:32.880 for certainty. So I think the fact that the Secretary 0:08:32.880 --> 0:08:35.920 has said June one makes sense given those payments, except 0:08:35.920 --> 0:08:41.520 we do we can't be that accurate. We have indicated 0:08:42.000 --> 0:08:46.520 in our own analysis that yes, those first few weeks 0:08:46.559 --> 0:08:49.880 of June are critical. We may be able to slip 0:08:49.920 --> 0:08:55.000 by revenues coming in that would help keep cash in 0:08:55.000 --> 0:08:57.520 the bank. What we have said is that if we 0:08:57.559 --> 0:09:02.360 can make it to June fifth teenth. On June the fifteenth, 0:09:02.440 --> 0:09:08.120 quarterly estimated payments for the current HACKS year twenty three 0:09:08.480 --> 0:09:13.920 are due, if by chance we receive the quarterly revenue 0:09:13.920 --> 0:09:17.960 payments coming in as we expect on that date and 0:09:18.040 --> 0:09:21.240 we can make it the fifteenth without defaulting, that will 0:09:21.840 --> 0:09:25.040 allow us to go further into the end of June. 0:09:25.520 --> 0:09:27.520 And if we can get to the end of June, 0:09:28.320 --> 0:09:31.840 there will be an opportunity once again to trigger what 0:09:31.880 --> 0:09:35.920 we call an extraordinary measure which would create one hundred 0:09:35.920 --> 0:09:40.200 and forty some billion dollars in d by not by 0:09:41.080 --> 0:09:47.280 the civil service, civil Service g fund payments, not investing 0:09:47.280 --> 0:09:48.880 those funds. So I don't want to get into the 0:09:49.800 --> 0:09:51.920 nitty gritty of all this, but there are there is 0:09:52.440 --> 0:09:56.920 the uncertainty. Here is early June, no question. But if 0:09:56.920 --> 0:09:59.040 you can get to June to fifteenth, we. 0:09:59.000 --> 0:10:00.680 Can make it to the end June. 0:10:00.960 --> 0:10:04.720 We could probably make it without any threat of default 0:10:04.800 --> 0:10:07.400 until at least late July. 0:10:08.280 --> 0:10:10.280 So you mentioned threat of default, and that's a good 0:10:10.280 --> 0:10:12.640 segue into my next question. You know, we surveyed a 0:10:12.640 --> 0:10:18.720 bunch of Bloomberg terminal clients back in March sorry for 0:10:18.920 --> 0:10:21.480 their thoughts on the dead ceiling, and there was optimism, 0:10:21.600 --> 0:10:26.480 overwhelming optimism, like almost ninety percent that a dead ceiling 0:10:26.520 --> 0:10:29.800 breach would be avoided. But as you can imagine, as 0:10:29.840 --> 0:10:33.000 we get closer and closer to these X dates, more 0:10:33.040 --> 0:10:35.480 and more people get a little concerned. There's a little 0:10:35.480 --> 0:10:38.560 bit of more uncertainty. So the question I have for 0:10:38.640 --> 0:10:41.240 you first is do you think we're going to default? 0:10:41.640 --> 0:10:41.760 Uh? 0:10:42.080 --> 0:10:45.600 And secondly, if you think we're not going to default, 0:10:46.800 --> 0:10:48.880 you know when will they come up? With an agreement. 0:10:48.920 --> 0:10:51.960 Will it be like the night before there you know 0:10:52.040 --> 0:10:54.439 the X date, or is this something where you think 0:10:54.480 --> 0:10:57.040 the parties can come together and actually solve with some 0:10:57.120 --> 0:10:58.479 time left to spare. 0:10:59.400 --> 0:11:05.360 Well, good questions all. Number one, just my personal position 0:11:05.440 --> 0:11:08.240 on this is we will not default. I think the 0:11:09.280 --> 0:11:12.600 as we get closer, as you say, to the potential 0:11:12.720 --> 0:11:17.320 date of a default, I think the market will send 0:11:17.320 --> 0:11:20.480 a signal, a strong signal. We're starting to see a 0:11:20.559 --> 0:11:22.640 little bit of that. I admit that I don't think 0:11:22.679 --> 0:11:24.840 that we've seen the signals that I would have expected 0:11:24.880 --> 0:11:27.199 by now, but we're starting to see some of that. 0:11:27.520 --> 0:11:31.640 And I'm seeing that specifically in two particular parameters. Number one, 0:11:31.800 --> 0:11:35.920 short one month type of securities, as you might know 0:11:37.000 --> 0:11:40.400 when they were put out on the market earlier. I 0:11:40.440 --> 0:11:44.080 think last week or week four last I tipped up 0:11:44.120 --> 0:11:47.280 a whole percentage point from four point five to five 0:11:47.320 --> 0:11:50.760 point eight percent or something, just a rent. I think 0:11:50.760 --> 0:11:54.480 that was the largest increase in that one kind of 0:11:54.720 --> 0:11:57.720 one month type of security. We also are seeing something 0:11:57.760 --> 0:12:00.480 and I'm not a financial expert at all in this, 0:12:01.559 --> 0:12:05.880 but something called the credit default swaps, and they are 0:12:06.000 --> 0:12:08.840 kind of an indicate this is the basically insurance company 0:12:08.960 --> 0:12:14.120 that people buy, of course, to buy insurance against a default. 0:12:14.960 --> 0:12:19.360 As a consequence, we do see we've seen that kick 0:12:19.440 --> 0:12:22.760 up rather dramatically also, so I think we're starting to 0:12:22.800 --> 0:12:25.600 see signals out there in the market that there could 0:12:25.840 --> 0:12:28.880 that there is, but it's still a low probability. I 0:12:28.880 --> 0:12:32.080 don't believe it will default. So I do think that 0:12:32.200 --> 0:12:36.600 we will get there now. To your point, though typical 0:12:36.840 --> 0:12:41.559 just like college students or students waiting till the last minute, 0:12:41.600 --> 0:12:43.440 I do think this could go right up to the 0:12:43.440 --> 0:12:50.040 brink and in negotiations. My hope would be and I 0:12:50.880 --> 0:12:54.320 pray that we do not default. But I think we'll 0:12:54.360 --> 0:12:58.880 probably see start to see market reaction here into May, 0:12:59.160 --> 0:13:02.520 early into June, particularly as we get closer that date, 0:13:03.120 --> 0:13:09.640 and that will, let's say, incentivize the policymakers to get 0:13:09.679 --> 0:13:13.480 to find some agreement. They may not be able to 0:13:13.600 --> 0:13:17.760 reach a full agreement, but then my guess is recognizing 0:13:17.800 --> 0:13:22.280 what the impact would be from a default on the economy, 0:13:22.320 --> 0:13:26.240 on individuals and people and programs right down the line 0:13:26.280 --> 0:13:30.040 from medicare to medicate, my guess is that they might 0:13:30.280 --> 0:13:33.600 then see the need to have an extension a short 0:13:33.720 --> 0:13:37.319 term extension maybe to the end of July, to give 0:13:37.360 --> 0:13:40.120 them time to work out an agreement. I just I 0:13:40.240 --> 0:13:43.240 take Speaker of McCarthy at his word he does not 0:13:43.360 --> 0:13:45.920 want a default. Mister mcconnall does not want a default. 0:13:46.240 --> 0:13:53.000 President obviously and does not want to default. Mister Jefferies 0:13:53.120 --> 0:13:55.679 and mister Schumer do not want to default. I take 0:13:55.720 --> 0:13:59.520 it at their word what they mean, which would give 0:13:59.559 --> 0:14:02.319 me hope that we will not well see it, but 0:14:02.320 --> 0:14:06.720 but we'll want The consequences are starting to not getting 0:14:06.920 --> 0:14:09.480 there or already starting to be felt, and we'll only 0:14:09.480 --> 0:14:11.640 get worse as we go into the latter part of 0:14:11.679 --> 0:14:13.640 this month into early June. 0:14:14.000 --> 0:14:16.840 So obviously you've been in Washington a very long time. 0:14:16.920 --> 0:14:19.440 Could you give us some insight, baseball of how this 0:14:19.560 --> 0:14:22.480 actually works, because you know, we see statements from the 0:14:22.520 --> 0:14:25.120 Speaker of the House, Kevin McCarthy that they won't do 0:14:25.160 --> 0:14:28.400 a short term solution. President Biden won't do a term solution. 0:14:28.520 --> 0:14:30.280 So you think of the meeting last week or any 0:14:30.880 --> 0:14:33.800 future meetings. Is this a situation where President Biden and 0:14:33.880 --> 0:14:37.080 the Speaker lectured to each other or are they actually 0:14:37.160 --> 0:14:40.640 at some point well they start negotiating. How does it 0:14:40.680 --> 0:14:42.760 work when they get into these rooms. 0:14:44.120 --> 0:14:49.040 Well, you're kind to suggest that I know how it works. 0:14:50.000 --> 0:14:52.440 I thought I knew how it worked there was a time. 0:14:52.520 --> 0:14:56.000 But the truth of the matter is that at least 0:14:56.240 --> 0:14:59.560 the four are talking. As I say, that's good sign. 0:14:59.600 --> 0:15:04.280 At least they're talking, and we'll talk tomorrow and the 0:15:04.320 --> 0:15:07.080 better news and this is pretentious as a former Senate 0:15:07.200 --> 0:15:10.800 staffer for many years, the other good news is the 0:15:10.960 --> 0:15:15.280 staff are now talking and Dan Myers, who was with 0:15:15.400 --> 0:15:20.480 the Speaker McCarthy, as well as O and B Director 0:15:20.840 --> 0:15:25.520 Young are starting to talk. So I think that what 0:15:25.600 --> 0:15:29.000 really matters here, and this is going to sound really terrible, 0:15:30.200 --> 0:15:32.760 I think it's I think it's at the staff level. 0:15:32.840 --> 0:15:35.440 Right now, they have been meeting. The staff have been 0:15:35.440 --> 0:15:39.520 meeting since the meeting at the White House earlier this week. 0:15:39.960 --> 0:15:43.360 My guess is they'll start to come bring their bosses 0:15:43.400 --> 0:15:46.200 some areas and where there's compromise or where there are 0:15:46.400 --> 0:15:51.000 areas of common agreement, and we'll start to nip away 0:15:51.120 --> 0:15:56.120 at finding some form of a compromise between the President 0:15:56.320 --> 0:15:58.680 and particularly the House. 0:16:00.560 --> 0:16:02.160 I deal. 0:16:02.360 --> 0:16:06.840 I've dealt my career with a number of these situations, 0:16:06.920 --> 0:16:10.120 and it does come down to when you have a 0:16:10.160 --> 0:16:12.160 divide at Congress that we have right now. 0:16:13.040 --> 0:16:13.880 Whether it was in. 0:16:14.080 --> 0:16:22.000 Twenty my initial exposure to this, that's hard to hard 0:16:22.040 --> 0:16:26.080 to say this, but was nineteen eighty five with when 0:16:26.080 --> 0:16:32.080 we were passing having to reach up to two trillion 0:16:32.200 --> 0:16:36.760 dollars in raising the debt limit in nineteen eighty five Trade. 0:16:36.760 --> 0:16:39.800 Now I remember thirty five, it's. 0:16:39.680 --> 0:16:44.760 Two Trade and a couple of senators a senator, and 0:16:44.800 --> 0:16:49.840 then became three senators, Senator Phil Graham and Senator Warren 0:16:49.880 --> 0:16:54.320 Rudman and Senator Fritz Hollings came together and said to 0:16:54.520 --> 0:16:56.680 the leadership of the Senate, we're not going into my 0:16:56.800 --> 0:16:59.600 boss at that time, now, Senator Dominici, we're not going 0:16:59.640 --> 0:17:01.960 to vote for an increase in the debt limit unless 0:17:01.960 --> 0:17:05.159 we change the budget process. And so out of that 0:17:05.240 --> 0:17:12.399 came the historic Graham, Rudman Hollings legislation, and that, by 0:17:12.440 --> 0:17:14.280 the way, we're still living with elements of that to 0:17:14.359 --> 0:17:17.560 this day, such things as caps and sequesters. So I 0:17:18.440 --> 0:17:20.320 do think when you have a divide in Congress like 0:17:20.359 --> 0:17:23.200 we have here, as we had quite frankly, probably more 0:17:23.240 --> 0:17:28.600 recently in everybody's memory, would be twenty twenty eleven when 0:17:28.640 --> 0:17:31.000 we were in a very almost similar situation. Now the 0:17:31.040 --> 0:17:35.520 margins were much different from Speaker Bayner Republican in control of. 0:17:35.480 --> 0:17:37.000 The House, and. 0:17:38.640 --> 0:17:42.760 At a House that was controlled by Republicans, the Senate 0:17:43.040 --> 0:17:48.840 was controlled by a very small margin by Democrats, the 0:17:49.000 --> 0:17:54.040 majority leader Harry Reid. Interestingly, mister McConnell was the minority 0:17:54.119 --> 0:17:56.600 leader at that time also, And of course in the 0:17:56.640 --> 0:18:00.159 White House we had the Vice President was mister and 0:18:00.280 --> 0:18:03.359 under President Obama, and so we have this. We have 0:18:03.440 --> 0:18:07.240 some people who have been through this not well a 0:18:07.280 --> 0:18:11.280 few years ago in twenty eleven, and it forced a 0:18:11.440 --> 0:18:15.720 forced a compromise and forced legislation that set caps for 0:18:15.800 --> 0:18:21.399 ten years, which we quickly modified after a few years. 0:18:21.640 --> 0:18:24.800 But I do think that in a divided Congress, it 0:18:24.800 --> 0:18:27.000 can't be my way or the highway, whether it's mister 0:18:27.520 --> 0:18:31.560 McCarthy's position or the President saying I'm not going to negotiate. 0:18:32.200 --> 0:18:35.800 No surprise coming here from the by Parson policy so center. 0:18:35.920 --> 0:18:38.400 I have to believe that at the end of the day, 0:18:38.440 --> 0:18:40.280 there has to be a compromise, and I believe it 0:18:40.320 --> 0:18:44.199 is starting to slowly begin to happen. In fact, I 0:18:44.359 --> 0:18:48.919 understood the President was willing to consider a removing taking 0:18:48.960 --> 0:18:54.840 the position that the unobligated balances, unexpended balance, obligated unobligated 0:18:54.880 --> 0:19:00.080 balances from the six pieces of legislation, primarily the pandemic 0:19:00.160 --> 0:19:03.760 legislation that have not been obligated, that he would be 0:19:03.800 --> 0:19:06.040 willing to call that back. Well, that's a good start, 0:19:07.560 --> 0:19:13.000 and then if I can maybe, well i'll stop the wayne. 0:19:13.040 --> 0:19:14.679 Then you may have a couple of questions. But I 0:19:14.720 --> 0:19:16.720 have a possible outcome too. 0:19:17.000 --> 0:19:18.840 Yeah, and I want to get into that. But you 0:19:18.920 --> 0:19:24.320 mentioned the eighty five experience, the twenty eleven experience. Is 0:19:24.359 --> 0:19:27.679 this and I mentioned earlier this is a movie we 0:19:27.840 --> 0:19:29.919 keep seeing over and over again. It's a sequel we 0:19:30.000 --> 0:19:33.080 don't want. Is this the scariest version when you think 0:19:33.080 --> 0:19:36.359 about the narrow margins in the House that need to 0:19:36.359 --> 0:19:39.480 get to sixty in a seeming willingness by some people 0:19:39.520 --> 0:19:43.240 to say, some members to say default isn't going to 0:19:43.280 --> 0:19:45.439 be that big of a deal. Are your what are 0:19:45.440 --> 0:19:46.120 your thoughts on that? 0:19:46.760 --> 0:19:49.520 Well, first of all, I would note that I think 0:19:49.640 --> 0:19:52.360 and I looked at some of the statistics here recently, 0:19:53.280 --> 0:19:56.280 over half of the members of the House of Representatives 0:19:56.280 --> 0:19:59.800 weren't here in twenty eleven, twenty twelve. Over half of 0:19:59.840 --> 0:20:02.520 them have never had it gone through the process of 0:20:02.560 --> 0:20:07.959 active producing a budget, a real budget resolution. As you know, Dwayne, particularly, 0:20:08.400 --> 0:20:11.320 there is a process of putting together a budget on 0:20:11.359 --> 0:20:15.200 the House Senate, compromising, and that then guide's fiscal policy. 0:20:15.680 --> 0:20:17.840 Most of them have not had the real experience of 0:20:17.840 --> 0:20:20.600 what it really means to follow the regular order as 0:20:20.640 --> 0:20:26.320 I call it. So, but you're right, I'll be honest, 0:20:26.400 --> 0:20:29.080 this one's a little bit more dicey than some of 0:20:29.080 --> 0:20:31.680 the previous ones because, first of all, the margins are 0:20:31.720 --> 0:20:37.399 so small for mister McCarthy, and as a consequence it 0:20:37.520 --> 0:20:40.720 is he is in a very difficult situation as to 0:20:40.920 --> 0:20:44.200 his own speakership as to whether or not given the 0:20:44.240 --> 0:20:48.280 commitments he made and is unwillingness to move off of 0:20:48.440 --> 0:20:52.080 where we where the House passed the legislation was of 0:20:52.119 --> 0:20:55.200 a couple of weeks ago. He's in a very cat 0:20:55.320 --> 0:21:00.560 can he compromise without jeopardizing his own speakership? And I 0:21:00.600 --> 0:21:04.199 think that's really part of the dilemma we face today, 0:21:04.960 --> 0:21:07.359 that they face today, and why it makes this a 0:21:07.480 --> 0:21:11.879 little bit more risky than some of the previous experiences 0:21:11.880 --> 0:21:15.720 that you and I and others have seen in in 0:21:15.880 --> 0:21:18.000 the in recent. 0:21:17.800 --> 0:21:23.600 History well to that point. And who has the leverage here? 0:21:24.080 --> 0:21:26.879 I would have said before that the House passed their bill, 0:21:28.160 --> 0:21:33.600 Democrats probably have the leverage, but maybe it's McCarthy given 0:21:33.640 --> 0:21:35.920 the dynamics of his caucus in the fact that they 0:21:35.960 --> 0:21:39.159 actually passed the bill. What do you what do you 0:21:39.160 --> 0:21:40.560 think the leverage lies right now? 0:21:43.320 --> 0:21:46.680 It's a good question. I would say that the leverage 0:21:48.040 --> 0:21:51.160 and you may not. I still think the leverage lies 0:21:51.200 --> 0:21:56.159 with the President. I do, and I say that not 0:21:56.320 --> 0:22:00.680 because it's something that he wants to do or Secretary 0:22:00.760 --> 0:22:04.679 Yellen wants to do. But if it comes to whether 0:22:04.880 --> 0:22:08.080 or not he breaks a law, which is that he 0:22:09.080 --> 0:22:14.679 continues to provide the full faith and credit of the 0:22:14.680 --> 0:22:23.879 American trasuries securities, he has the potential authority in his 0:22:24.000 --> 0:22:28.520 back pocket called the Amendment fourteen of the Constitution that 0:22:28.680 --> 0:22:32.520 the question of the full faith and credit of the 0:22:32.560 --> 0:22:41.800 American securities shall not be called into question. And it's questionable, 0:22:42.359 --> 0:22:45.000 but I do think that he's not going to allow 0:22:45.960 --> 0:22:48.000 the full faith and credit of the United States to 0:22:48.080 --> 0:22:48.919 be jeopardized. 0:22:48.920 --> 0:22:50.159 And if it gets down. 0:22:49.960 --> 0:22:54.600 To it that there really is no solution. I believe 0:22:54.640 --> 0:22:59.160 he will go ahead and trigger a rule Amendment fourteen 0:22:59.200 --> 0:23:02.919 of the Constitution. We've never been here before, as you know, 0:23:03.960 --> 0:23:09.560 I say that without any inside information whatsoever. But I 0:23:09.720 --> 0:23:15.040 do believe we did have an nineteen thirty five Perry 0:23:15.200 --> 0:23:18.040 versus the United States. We had a little similar situation 0:23:18.480 --> 0:23:21.640 to Supreme Court ruled that the full faith and credit 0:23:21.720 --> 0:23:24.120 the United States should never be called into question under 0:23:25.000 --> 0:23:31.200 Amendment number fourteen. So I think that the leverage may 0:23:31.280 --> 0:23:35.320 still to the extent that people have leverage, I still 0:23:35.400 --> 0:23:37.840 think it may lie with the executive and the President. 0:23:38.440 --> 0:23:40.600 Well, if I can just ask a quick question on 0:23:40.680 --> 0:23:45.440 that to your point, be tested. But yeah, we see 0:23:45.480 --> 0:23:49.080 the nervousness in the markets and getting worse as we 0:23:49.119 --> 0:23:52.480 get closer to the X date. If going do you 0:23:52.520 --> 0:23:56.919 think going the route of the Amendment fourteen amendment? Do 0:23:56.960 --> 0:24:01.600 you think that creates more uncertain Uh, you don't know 0:24:01.600 --> 0:24:04.160 if he would even stand from a legal sting. 0:24:05.119 --> 0:24:07.600 Yeah, you're right, And that's one of the one of 0:24:07.680 --> 0:24:09.960 the reasons why I don't think anybody wants to go 0:24:10.040 --> 0:24:13.080 that far is because even if they were to do it, 0:24:13.080 --> 0:24:15.720 then there would probably be legal challenges that would be 0:24:15.920 --> 0:24:19.600 disruptive there would be court cases, and as a consequence, 0:24:19.640 --> 0:24:23.000 the market would continue to be unclear and and it 0:24:23.000 --> 0:24:25.520 would be uncertainty and risk out there. 0:24:25.840 --> 0:24:28.560 So it would continue, I believe. 0:24:28.359 --> 0:24:35.760 To be a real a drain on our economic outlook. 0:24:36.720 --> 0:24:40.840 By the way, I say this with because various conversations 0:24:40.840 --> 0:24:44.600 and presentation I gave yesterday to a group, I said 0:24:44.600 --> 0:24:46.240 something about if there was a default, it'd be a 0:24:46.240 --> 0:24:51.639 short default, and because the consequences will be so rapid, 0:24:51.680 --> 0:24:56.120 so quick, uh, and so so much damage done politically 0:24:56.160 --> 0:24:58.520 both the Republicans and Democrats, that they figure out a 0:24:58.520 --> 0:25:03.840 way to wreck their mistake, I think quickly, unfortunately and 0:25:03.840 --> 0:25:06.359 at to my point. But a default is a default, 0:25:06.760 --> 0:25:11.040 and if you default once, that has a long term ramification. 0:25:11.119 --> 0:25:14.280 So nobody wants to go this route, I believe, And 0:25:14.320 --> 0:25:16.760 as I say, I take, I take the four leaders 0:25:17.359 --> 0:25:20.280 statements at the heart that they do not want that. 0:25:20.840 --> 0:25:23.720 So this would be a this would be a real 0:25:23.840 --> 0:25:31.000 challenge h going forward to use the fourteenth Amendment. But uh, 0:25:31.200 --> 0:25:32.679