Speaker 1: Hello, and welcome to the Votes and Verdicts podcast, hosted
Speaker 1: by the policy and litigation team at Bloomberg Intelligence, the
Speaker 1: investment research platform at Bloomberg LP. This podcast series examines
Speaker 1: the intersection of business policy and law. I'm Done Right
Speaker 1: and a analysis with Bloomberg Intelligence covering government healthcare policy.
Speaker 2: And my name is Nathan Dean and I'm an analyst
Speaker 2: with Bloomberg Intelligence covering financials policy.
Speaker 1: So our topic for today is you may have heard
Speaker 1: about it, the debt ceiling, and if you've been around
Speaker 1: DC long enough, you know that this is that sequel
Speaker 1: we wish lawmakers would stop making. But we're lucky to
Speaker 1: have Bill Holand, Senior Vice President of the Bi Partisian
Speaker 1: Policy Center, a nonprofit think tank that engages Republicans and
Speaker 1: Democrats to promote bipartisanship and policy development, to discuss this
Speaker 1: important topic. When we decided to move forward with a
Speaker 1: podcast focused on the debt ceiling, Bill is the first
Speaker 1: person who came to mind. I've seen and heard Bill
Speaker 1: talk about the country's fiscal situation and healthcare financing many times,
Speaker 1: and I've learned a lot from those conversations. So I'm
Speaker 1: looking forward to today's discussion. Just briefly, prior to the
Speaker 1: Bipartisan Policy Center, Bill spent thirty three years in the
Speaker 1: federal government, including as a staff member for Senate Majority
Speaker 1: Leader Bill Frist, as a director for the Senate Budget
Speaker 1: Committee under Senator Pete Diminici of New Mexico, and at
Speaker 1: Department of Agriculture and the Congressional Budget Office. And prior
Speaker 1: to joining the BBC in September twenty twelve, that Bill
Speaker 1: was the vice president of public policy for SIGNA. So
Speaker 1: with all that, Bill, welcome to the Votes in Verdicts podcasts.
Speaker 3: Thank you, Dwayne. Good to be with you.
Speaker 1: So Bill, can you tell us how you came to
Speaker 1: join the BPC and maybe more about what the PPC
Speaker 1: is and the work you're doing to educate people about
Speaker 1: debt and deficits.
Speaker 4: Sure, thank you, Dwayne. We had I had a saying
Speaker 4: on the that once you worked for a United States senator,
Speaker 4: you work for him for life. And as it turns
Speaker 4: out that once I had left the hill, as you
Speaker 4: had mentioned, Dwayne, I worked for Senator Majority Leader doctor
Speaker 4: Bill Frist, and I also worked for Senator P. P.
Speaker 3: Dominici.
Speaker 4: Both of them had a term limited or left the
Speaker 4: left the hill themselves. Senator Dominici was here at the
Speaker 4: Biparson Policy Center, as was doctor Bill Frist as consultants
Speaker 4: here at BPC, and both of them I had left
Speaker 4: the hill, and as I I had taken this position
Speaker 4: with the SIGNA as you mentioned, which was a very
Speaker 4: trying time because this is when the Patient Protection Affordable
Speaker 4: Care Act was coming into existence, and it was really
Speaker 4: like a fire hose and I was hoping for a
Speaker 4: little bit less fire hose type job after coming off
Speaker 4: I rather technic hill. But anyway, long story short. Both
Speaker 4: Senator Brist and Senator Dementia and one other former boss
Speaker 4: a very early in my career, long time doctor Alice Rivlin,
Speaker 4: who was the first director of CBO, she was here
Speaker 4: also working, and they all asked me to come over
Speaker 4: here to resolve. At that time was a dispute between
Speaker 4: our economic team and our health team over a particular
Speaker 4: policy issue. Asked me to come over help work it out.
Speaker 4: And I was only going to be here a year
Speaker 4: and now it's going on about it. So that's how
Speaker 4: I came here. And yes, VPC said role is as
Speaker 4: as its name would imply, is trying to find in
Speaker 4: these very difficult day and age solutions to some of
Speaker 4: these difficult issues. We face that in a by Parson
Speaker 4: way because we truly believe, and I believe from the
Speaker 4: years of experience on the Hill, that the best policy
Speaker 4: is that policy has done in a Biparson way, and
Speaker 4: no better place than to it try to continue to
Speaker 4: practice that than the by Parson Policy Center.
Speaker 1: And we have slit government right now which requires a
Speaker 1: lot of bipartisanship to address some of our key issues.
Speaker 1: One of them is debt ceiling. Can you give us
Speaker 1: a three second version of what the debt sealing is?
Speaker 1: In white matters?
Speaker 3: Sure, the.
Speaker 4: Country has a statutory in law, written in the law,
Speaker 4: a limit on the total amount of outstanding dead it
Speaker 4: can have at any one time. And that law law
Speaker 4: is right now about thirty one point four trillion dollars.
Speaker 4: It is thirty one point four trillion dollars. What that
Speaker 4: number is is the accumulation of deficits from the beginning
Speaker 4: of the republic, offset by any surpluses over there is
Speaker 4: from the beginning of the republic to today. That's the
Speaker 4: amount of deficits. If you like that, we have run,
Speaker 4: as I say, offset by any surpluses, and the accumulation
Speaker 4: of that over the history of this country is now
Speaker 4: up to thirty one point four trillion dollars, and that's
Speaker 4: written into law. Congress has to pass another law to
Speaker 4: change that number. And we have reached that point thirty
Speaker 4: one point four trillion dollars back in January, and as
Speaker 4: a consequence, we now have this standoff because to pass
Speaker 4: that pass that legislation obviously requires Congress in the House
Speaker 4: and the Senate and the present agreeing to a law,
Speaker 4: signing a law in place. It's made even more difficult
Speaker 4: by the fact that very tight House margins the Speaker
Speaker 4: McCarthy has to deal with. Is also made difficult by
Speaker 4: the fact that in the United States Senate, as you know,
Speaker 4: doing that legislation would be subject to the filibuster rules.
Speaker 4: They need sixty votes in the Senate to raise that
Speaker 4: statutory debtline. So that's where we are today. We've reached
Speaker 4: that limit. We are now in the process of at
Speaker 4: least having discussions at the White House earlier this week,
Speaker 4: and we'll have discussions tomorrow and staff are starting to talk,
Speaker 4: which is a good news. But we are in a
Speaker 4: very tight situation now where we might reach that limit
Speaker 4: after all other measures have taken into effect that we've
Speaker 4: used to make room under the cap to pay our bills.
Speaker 4: But come sometime here early in June possibly, or and
Speaker 4: we can get into that later. We do need to
Speaker 4: pass a law that raises that limit, otherwise the United
Speaker 4: States government would default for the first time in its history.
Speaker 1: Do you think the June one date that Secretary Yelling
Speaker 1: laid out a couple of weeks ago is close to
Speaker 1: the X state or does the BBC absence of what
Speaker 1: the X state might be other than June one X state.
Speaker 4: Yes, I think, first of all, we don't say June one.
Speaker 4: We've done our analysis earlier this week and put it
Speaker 4: out and we are continuing updating that. This is a
Speaker 4: difficult estimate to make, largely because it's all predicated upon
Speaker 4: expenditures going out and revenues coming in, and that can
Speaker 4: vary dramatically. But we do see in the numbers and
Speaker 4: we know what's going to happen. As an example, first
Speaker 4: of June, there will be a forty seven billion dollar
Speaker 4: Medicare payment, a twelve billion dollars civil service military retirement payment,
Speaker 4: do twelve billion dollar veterans benefits, and then the next day,
Speaker 4: on June the second, there will be a twenty five
Speaker 4: billion dollars security payment going out. All that suggests to
Speaker 4: us that we're going to have some major outflows and
Speaker 4: hopefully there's cash in the bank, so to speak, to
Speaker 4: cover those benefits, but we have to we don't know
Speaker 4: for certainty. So I think the fact that the Secretary
Speaker 4: has said June one makes sense given those payments, except
Speaker 4: we do we can't be that accurate. We have indicated
Speaker 4: in our own analysis that yes, those first few weeks
Speaker 4: of June are critical. We may be able to slip
Speaker 4: by revenues coming in that would help keep cash in
Speaker 4: the bank. What we have said is that if we
Speaker 4: can make it to June fifth teenth. On June the fifteenth,
Speaker 4: quarterly estimated payments for the current HACKS year twenty three
Speaker 4: are due, if by chance we receive the quarterly revenue
Speaker 4: payments coming in as we expect on that date and
Speaker 4: we can make it the fifteenth without defaulting, that will
Speaker 4: allow us to go further into the end of June.
Speaker 4: And if we can get to the end of June,
Speaker 4: there will be an opportunity once again to trigger what
Speaker 4: we call an extraordinary measure which would create one hundred
Speaker 4: and forty some billion dollars in d by not by
Speaker 4: the civil service, civil Service g fund payments, not investing
Speaker 4: those funds. So I don't want to get into the
Speaker 4: nitty gritty of all this, but there are there is
Speaker 4: the uncertainty. Here is early June, no question. But if
Speaker 4: you can get to June to fifteenth, we.
Speaker 3: Can make it to the end June.
Speaker 4: We could probably make it without any threat of default
Speaker 4: until at least late July.
Speaker 2: So you mentioned threat of default, and that's a good
Speaker 2: segue into my next question. You know, we surveyed a
Speaker 2: bunch of Bloomberg terminal clients back in March sorry for
Speaker 2: their thoughts on the dead ceiling, and there was optimism,
Speaker 2: overwhelming optimism, like almost ninety percent that a dead ceiling
Speaker 2: breach would be avoided. But as you can imagine, as
Speaker 2: we get closer and closer to these X dates, more
Speaker 2: and more people get a little concerned. There's a little
Speaker 2: bit of more uncertainty. So the question I have for
Speaker 2: you first is do you think we're going to default?
Speaker 4: Uh?
Speaker 2: And secondly, if you think we're not going to default,
Speaker 2: you know when will they come up? With an agreement.
Speaker 2: Will it be like the night before there you know
Speaker 2: the X date, or is this something where you think
Speaker 2: the parties can come together and actually solve with some
Speaker 2: time left to spare.
Speaker 4: Well, good questions all. Number one, just my personal position
Speaker 4: on this is we will not default. I think the
Speaker 4: as we get closer, as you say, to the potential
Speaker 4: date of a default, I think the market will send
Speaker 4: a signal, a strong signal. We're starting to see a
Speaker 4: little bit of that. I admit that I don't think
Speaker 4: that we've seen the signals that I would have expected
Speaker 4: by now, but we're starting to see some of that.
Speaker 4: And I'm seeing that specifically in two particular parameters. Number one,
Speaker 4: short one month type of securities, as you might know
Speaker 4: when they were put out on the market earlier. I
Speaker 4: think last week or week four last I tipped up
Speaker 4: a whole percentage point from four point five to five
Speaker 4: point eight percent or something, just a rent. I think
Speaker 4: that was the largest increase in that one kind of
Speaker 4: one month type of security. We also are seeing something
Speaker 4: and I'm not a financial expert at all in this,
Speaker 4: but something called the credit default swaps, and they are
Speaker 4: kind of an indicate this is the basically insurance company
Speaker 4: that people buy, of course, to buy insurance against a default.
Speaker 4: As a consequence, we do see we've seen that kick
Speaker 4: up rather dramatically also, so I think we're starting to
Speaker 4: see signals out there in the market that there could
Speaker 4: that there is, but it's still a low probability. I
Speaker 4: don't believe it will default. So I do think that
Speaker 4: we will get there now. To your point, though typical
Speaker 4: just like college students or students waiting till the last minute,
Speaker 4: I do think this could go right up to the
Speaker 4: brink and in negotiations. My hope would be and I
Speaker 4: pray that we do not default. But I think we'll
Speaker 4: probably see start to see market reaction here into May,
Speaker 4: early into June, particularly as we get closer that date,
Speaker 4: and that will, let's say, incentivize the policymakers to get
Speaker 4: to find some agreement. They may not be able to
Speaker 4: reach a full agreement, but then my guess is recognizing
Speaker 4: what the impact would be from a default on the economy,
Speaker 4: on individuals and people and programs right down the line
Speaker 4: from medicare to medicate, my guess is that they might
Speaker 4: then see the need to have an extension a short
Speaker 4: term extension maybe to the end of July, to give
Speaker 4: them time to work out an agreement. I just I
Speaker 4: take Speaker of McCarthy at his word he does not
Speaker 4: want a default. Mister mcconnall does not want a default.
Speaker 4: President obviously and does not want to default. Mister Jefferies
Speaker 4: and mister Schumer do not want to default. I take
Speaker 4: it at their word what they mean, which would give
Speaker 4: me hope that we will not well see it, but
Speaker 4: but we'll want The consequences are starting to not getting
Speaker 4: there or already starting to be felt, and we'll only
Speaker 4: get worse as we go into the latter part of
Speaker 4: this month into early June.
Speaker 2: So obviously you've been in Washington a very long time.
Speaker 2: Could you give us some insight, baseball of how this
Speaker 2: actually works, because you know, we see statements from the
Speaker 2: Speaker of the House, Kevin McCarthy that they won't do
Speaker 2: a short term solution. President Biden won't do a term solution.
Speaker 2: So you think of the meeting last week or any
Speaker 2: future meetings. Is this a situation where President Biden and
Speaker 2: the Speaker lectured to each other or are they actually
Speaker 2: at some point well they start negotiating. How does it
Speaker 2: work when they get into these rooms.
Speaker 4: Well, you're kind to suggest that I know how it works.
Speaker 4: I thought I knew how it worked there was a time.
Speaker 4: But the truth of the matter is that at least
Speaker 4: the four are talking. As I say, that's good sign.
Speaker 4: At least they're talking, and we'll talk tomorrow and the
Speaker 4: better news and this is pretentious as a former Senate
Speaker 4: staffer for many years, the other good news is the
Speaker 4: staff are now talking and Dan Myers, who was with
Speaker 4: the Speaker McCarthy, as well as O and B Director
Speaker 4: Young are starting to talk. So I think that what
Speaker 4: really matters here, and this is going to sound really terrible,
Speaker 4: I think it's I think it's at the staff level.
Speaker 4: Right now, they have been meeting. The staff have been
Speaker 4: meeting since the meeting at the White House earlier this week.
Speaker 4: My guess is they'll start to come bring their bosses
Speaker 4: some areas and where there's compromise or where there are
Speaker 4: areas of common agreement, and we'll start to nip away
Speaker 4: at finding some form of a compromise between the President
Speaker 4: and particularly the House.
Speaker 3: I deal.
Speaker 4: I've dealt my career with a number of these situations,
Speaker 4: and it does come down to when you have a
Speaker 4: divide at Congress that we have right now.
Speaker 3: Whether it was in.
Speaker 4: Twenty my initial exposure to this, that's hard to hard
Speaker 4: to say this, but was nineteen eighty five with when
Speaker 4: we were passing having to reach up to two trillion
Speaker 4: dollars in raising the debt limit in nineteen eighty five Trade.
Speaker 3: Now I remember thirty five, it's.
Speaker 4: Two Trade and a couple of senators a senator, and
Speaker 4: then became three senators, Senator Phil Graham and Senator Warren
Speaker 4: Rudman and Senator Fritz Hollings came together and said to
Speaker 4: the leadership of the Senate, we're not going into my
Speaker 4: boss at that time, now, Senator Dominici, we're not going
Speaker 4: to vote for an increase in the debt limit unless
Speaker 4: we change the budget process. And so out of that
Speaker 4: came the historic Graham, Rudman Hollings legislation, and that, by
Speaker 4: the way, we're still living with elements of that to
Speaker 4: this day, such things as caps and sequesters. So I
Speaker 4: do think when you have a divide in Congress like
Speaker 4: we have here, as we had quite frankly, probably more
Speaker 4: recently in everybody's memory, would be twenty twenty eleven when
Speaker 4: we were in a very almost similar situation. Now the
Speaker 4: margins were much different from Speaker Bayner Republican in control of.
Speaker 3: The House, and.
Speaker 4: At a House that was controlled by Republicans, the Senate
Speaker 4: was controlled by a very small margin by Democrats, the
Speaker 4: majority leader Harry Reid. Interestingly, mister McConnell was the minority
Speaker 4: leader at that time also, And of course in the
Speaker 4: White House we had the Vice President was mister and
Speaker 4: under President Obama, and so we have this. We have
Speaker 4: some people who have been through this not well a
Speaker 4: few years ago in twenty eleven, and it forced a
Speaker 4: forced a compromise and forced legislation that set caps for
Speaker 4: ten years, which we quickly modified after a few years.
Speaker 4: But I do think that in a divided Congress, it
Speaker 4: can't be my way or the highway, whether it's mister
Speaker 4: McCarthy's position or the President saying I'm not going to negotiate.
Speaker 4: No surprise coming here from the by Parson policy so center.
Speaker 4: I have to believe that at the end of the day,
Speaker 4: there has to be a compromise, and I believe it
Speaker 4: is starting to slowly begin to happen. In fact, I
Speaker 4: understood the President was willing to consider a removing taking
Speaker 4: the position that the unobligated balances, unexpended balance, obligated unobligated
Speaker 4: balances from the six pieces of legislation, primarily the pandemic
Speaker 4: legislation that have not been obligated, that he would be
Speaker 4: willing to call that back. Well, that's a good start,
Speaker 4: and then if I can maybe, well i'll stop the wayne.
Speaker 4: Then you may have a couple of questions. But I
Speaker 4: have a possible outcome too.
Speaker 1: Yeah, and I want to get into that. But you
Speaker 1: mentioned the eighty five experience, the twenty eleven experience. Is
Speaker 1: this and I mentioned earlier this is a movie we
Speaker 1: keep seeing over and over again. It's a sequel we
Speaker 1: don't want. Is this the scariest version when you think
Speaker 1: about the narrow margins in the House that need to
Speaker 1: get to sixty in a seeming willingness by some people
Speaker 1: to say, some members to say default isn't going to
Speaker 1: be that big of a deal. Are your what are
Speaker 1: your thoughts on that?
Speaker 4: Well, first of all, I would note that I think
Speaker 4: and I looked at some of the statistics here recently,
Speaker 4: over half of the members of the House of Representatives
Speaker 4: weren't here in twenty eleven, twenty twelve. Over half of
Speaker 4: them have never had it gone through the process of
Speaker 4: active producing a budget, a real budget resolution. As you know, Dwayne, particularly,
Speaker 4: there is a process of putting together a budget on
Speaker 4: the House Senate, compromising, and that then guide's fiscal policy.
Speaker 4: Most of them have not had the real experience of
Speaker 4: what it really means to follow the regular order as
Speaker 4: I call it. So, but you're right, I'll be honest,
Speaker 4: this one's a little bit more dicey than some of
Speaker 4: the previous ones because, first of all, the margins are
Speaker 4: so small for mister McCarthy, and as a consequence it
Speaker 4: is he is in a very difficult situation as to
Speaker 4: his own speakership as to whether or not given the
Speaker 4: commitments he made and is unwillingness to move off of
Speaker 4: where we where the House passed the legislation was of
Speaker 4: a couple of weeks ago. He's in a very cat
Speaker 4: can he compromise without jeopardizing his own speakership? And I
Speaker 4: think that's really part of the dilemma we face today,
Speaker 4: that they face today, and why it makes this a
Speaker 4: little bit more risky than some of the previous experiences
Speaker 4: that you and I and others have seen in in
Speaker 4: the in recent.
Speaker 1: History well to that point. And who has the leverage here?
Speaker 1: I would have said before that the House passed their bill,
Speaker 1: Democrats probably have the leverage, but maybe it's McCarthy given
Speaker 1: the dynamics of his caucus in the fact that they
Speaker 1: actually passed the bill. What do you what do you
Speaker 1: think the leverage lies right now?
Speaker 4: It's a good question. I would say that the leverage
Speaker 4: and you may not. I still think the leverage lies
Speaker 4: with the President. I do, and I say that not
Speaker 4: because it's something that he wants to do or Secretary
Speaker 4: Yellen wants to do. But if it comes to whether
Speaker 4: or not he breaks a law, which is that he
Speaker 4: continues to provide the full faith and credit of the
Speaker 4: American trasuries securities, he has the potential authority in his
Speaker 4: back pocket called the Amendment fourteen of the Constitution that
Speaker 4: the question of the full faith and credit of the
Speaker 4: American securities shall not be called into question. And it's questionable,
Speaker 4: but I do think that he's not going to allow
Speaker 4: the full faith and credit of the United States to
Speaker 4: be jeopardized.
Speaker 3: And if it gets down.
Speaker 4: To it that there really is no solution. I believe
Speaker 4: he will go ahead and trigger a rule Amendment fourteen
Speaker 4: of the Constitution. We've never been here before, as you know,
Speaker 4: I say that without any inside information whatsoever. But I
Speaker 4: do believe we did have an nineteen thirty five Perry
Speaker 4: versus the United States. We had a little similar situation
Speaker 4: to Supreme Court ruled that the full faith and credit
Speaker 4: the United States should never be called into question under
Speaker 4: Amendment number fourteen. So I think that the leverage may
Speaker 4: still to the extent that people have leverage, I still
Speaker 4: think it may lie with the executive and the President.
Speaker 1: Well, if I can just ask a quick question on
Speaker 1: that to your point, be tested. But yeah, we see
Speaker 1: the nervousness in the markets and getting worse as we
Speaker 1: get closer to the X date. If going do you
Speaker 1: think going the route of the Amendment fourteen amendment? Do
Speaker 1: you think that creates more uncertain Uh, you don't know
Speaker 1: if he would even stand from a legal sting.
Speaker 4: Yeah, you're right, And that's one of the one of
Speaker 4: the reasons why I don't think anybody wants to go
Speaker 4: that far is because even if they were to do it,
Speaker 4: then there would probably be legal challenges that would be
Speaker 4: disruptive there would be court cases, and as a consequence,
Speaker 4: the market would continue to be unclear and and it
Speaker 4: would be uncertainty and risk out there.
Speaker 3: So it would continue, I believe.
Speaker 4: To be a real a drain on our economic outlook.
Speaker 4: By the way, I say this with because various conversations
Speaker 4: and presentation I gave yesterday to a group, I said
Speaker 4: something about if there was a default, it'd be a
Speaker 4: short default, and because the consequences will be so rapid,
Speaker 4: so quick, uh, and so so much damage done politically
Speaker 4: both the Republicans and Democrats, that they figure out a
Speaker 4: way to wreck their mistake, I think quickly, unfortunately and
Speaker 4: at to my point. But a default is a default,
Speaker 4: and if you default once, that has a long term ramification.
Speaker 4: So nobody wants to go this route, I believe, And
Speaker 4: as I say, I take, I take the four leaders
Speaker 4: statements at the heart that they do not want that.
Speaker 4: So this would be a this would be a real
Speaker 4: challenge h going forward to use the fourteenth Amendment. But uh,
Speaker 4: it is in his back pocket.
Speaker 1: But even if President Biden were just signed the law,
Speaker 1: the House pass bill, we'd still be running deficits and
Speaker 1: we'd still have that feeling fights in the future. Oh,
Speaker 1: let's step back, and I know GPC and you have
Speaker 1: a lot of ideas here. What is your thoughts on
Speaker 1: some of the policy proposals that have been thrown out there,
Speaker 1: like a budget RNED Title commission, H is there. I'm
Speaker 1: personally skeptical of these commissions, largely because they don't tell
Speaker 1: us something we don't already know. It's more about willpower
Speaker 1: than anything else. But what are your thoughts on some
Speaker 1: of the ways out of this or a path forward
Speaker 1: so that ceiling fight doesn't become this thing we have
Speaker 1: to do every eighteen months.
Speaker 4: Well, the first thing would be to just eliminate the
Speaker 4: statute the law itself, and I'm somewhat agnostic about that,
Speaker 4: but I do think that there's only one other country
Speaker 4: in the world that has a similar kind of a
Speaker 4: debt limit, but they've said it so high that it
Speaker 4: doesn't become a problem. I think that's in Denmark. So
Speaker 4: there is a question as to whether or not we
Speaker 4: should even have this law on the books. My agnostic
Speaker 4: side of me says that yeah, but it lets us
Speaker 4: have this discussion that we're having right now about our
Speaker 4: fiscal future. However, to your point, even if this even
Speaker 4: if and it won't happen. But even if the House
Speaker 4: limits have cut to grow act however it's defined in law,
Speaker 4: the debt to GDP will continue to grow under our
Speaker 4: just baselines, And in fact, we'd still be well above
Speaker 4: one hundred percent of GDP on debt held by the
Speaker 4: public in the year thirty three. That's largely because as
Speaker 4: you know more than anybody else, and you people have
Speaker 4: been through this too. Is the central situation. What the
Speaker 4: focus of the legislation that the House is put forth
Speaker 4: has nothing to do with the probably what I consider
Speaker 4: to be the real drivers to spending. If you're really
Speaker 4: a focus on spending, and that's difficult, but it is
Speaker 4: so security, it is Medicare, it is Medicaid, it's our
Speaker 4: entitlement program and those that's where the real growth in
Speaker 4: spending is focusing on. Just most of the savings in
Speaker 4: the legislation from the House, almost all of seventy percent,
Speaker 4: seventy five percent of it has to do with setting
Speaker 4: a cap on one third of the federal budget, which
Speaker 4: is the annually appropriated accounts. And then I'll go one
Speaker 4: step further. I don't believe House Republicans or even Senate
Speaker 4: Republicans would ever go along with a defense discretionary number
Speaker 4: lower than what the President has proposed. And so this
Speaker 4: really brings us down to focusing only on about thirteen
Speaker 4: fourteen percent of all federal spending, and that's non defense discretionary.
Speaker 4: They have really you've taken so security off the table,
Speaker 4: medicare off the table, you've taken taxes off the table,
Speaker 4: I'm sure from the republican's perspective. So where do you go?
Speaker 4: You go to this thing called non defense discretionary, which
Speaker 4: is quite frankly, most American public would understand, is really
Speaker 4: what they think of when they think of government. That's
Speaker 4: small business administration, that's National Institutes of Health at CDC.
Speaker 4: That's that's the border patrol. That's t s A UH,
Speaker 4: it's education grants for educations, land grant educations at agriculture research.
Speaker 4: That's where most of our federal UH, where non defense
Speaker 4: discretionary goes, transportation, UH, safety in the air or water.
Speaker 4: And that's that is not the area that we should
Speaker 4: be focusing on in terms of reducing spinning, unless you're
Speaker 4: the alternative course is increasing revenues by increasing taxes, which
Speaker 4: is also not politically popular, So I it's understandable for
Speaker 4: these and in some way, I guess it's understandable not
Speaker 4: for me, but it's understandable with why some newly elected
Speaker 4: politician that's only been there in the Congress for a
Speaker 4: few years doesn't see the what are the real factors
Speaker 4: that are driving debt and deficits if they really want
Speaker 4: to do something about it.
Speaker 2: So I'm going to actually get rid of our constant
Speaker 2: and I'm going to make you in charge of the
Speaker 2: entire country and Congress. So you get to live in
Speaker 2: the White House and you get to direct the folks
Speaker 2: on the other side of Pennsylvania Avenue as you wish.
Speaker 2: What would you tell them to do? What is the
Speaker 2: what is the negotiated solution here that you think is
Speaker 2: the makes the most sense.
Speaker 4: Well, I wouldn't want the job because it is not.
Speaker 4: But I don't think there's any question. If I believe
Speaker 4: the numbers going forward, and for my children's future and
Speaker 4: my grandchildren's future, I would say we have to find
Speaker 4: a way to combine both. In additional revenues, I personally
Speaker 4: would focus on some form of a carbon tax or
Speaker 4: a climate oriented tax to deal with some of those issues.
Speaker 4: I would create more revenues at the same time very difficult.
Speaker 4: I would say, we have to remodel. We have to
Speaker 4: modify our major benefit programs, that being Social Security and yes,
Speaker 4: even Medicare, and we have to find a way to
Speaker 4: slow the rate of growth, not cut, just slow the
Speaker 4: rate of growth in those programs. I believe you can
Speaker 4: do that in Social Security by not affecting low income individuals.
Speaker 4: But you can restructure that so that I do not
Speaker 4: get a major Social Security benefit. I shouldn't be getting that.
Speaker 4: But I certainly can see that there are ways is
Speaker 4: to change the formula and Social Security, I think, and
Speaker 4: this is the hard one, the hardest one of all
Speaker 4: is in the healthcare area, finding ways to make this
Speaker 4: rather inefficient delivery system that we have out there costly
Speaker 4: system while also protecting the those who need benefits and
Speaker 4: should get benefits and have quality health care. I think
Speaker 4: you have to put the big ones on the table,
Speaker 4: sit down and have a serious discussion, have a compromise
Speaker 4: between both revenues and entitlements and entitlement spending. And I'm
Speaker 4: not suggesting in any way, shape or form that that
Speaker 4: would solve the problem overnight, but it has to be
Speaker 4: something that would go work into the future and lower
Speaker 4: that level of debt that we are accumulating, which is
Speaker 4: a form of attack on future generations.
Speaker 1: Anyway, when do you think we can actually have that conversation,
Speaker 1: Because it feels like so long as Medicares Trust Fund,
Speaker 1: the deax state for that gets pushed back further and further,
Speaker 1: there's less of a willingness. So is there ever going
Speaker 1: to be.
Speaker 4: Yeah, well, listen, I think you've just identified an opportunity here.
Speaker 4: I listen, nothing's going to happen in this Congress. I'm
Speaker 4: very skeptical of anything of any made uture deficit reductions
Speaker 4: going forward or any kind of a control of our debt.
Speaker 4: But you highlighted something that's coming up. They're going to
Speaker 4: have to not that far down the road, They're going
Speaker 4: to have to deal with the HI Trust Fund being
Speaker 4: exhausted I think in twenty thirty one, and the Social
Speaker 4: Security Trust Fund in twenty thirty three. There's going to
Speaker 4: be triggering events again, and that's going to force them
Speaker 4: to have to talk about changes in those programs, either
Speaker 4: additional revenues or modifications in the benefits. So this is
Speaker 4: separate apart from debt limit, but it does seem to
Speaker 4: me there are opportunities.
Speaker 3: You mentioned this. I'm not I agree with you.
Speaker 4: I'm not a big fan of commissions and special committees
Speaker 4: and all that kind of stuff. We did that with
Speaker 4: the twenty eleven, we did that with green Greenspan Commission
Speaker 4: back in the eighties. But it seems to me that
Speaker 4: something along those lines are probably going to.
Speaker 3: Be could be one.
Speaker 4: Maybe face saving I like device right now, go ahead
Speaker 4: and do the discretionary set of discretionary cap callbacks of it,
Speaker 4: but admit that the real problems are those that I've
Speaker 4: just outlined, and let's at least have a.
Speaker 3: Again safe phasing.
Speaker 4: Maybe it doesn't do anything, but maybe you should have
Speaker 4: another kind of a Greenspan commission set up to start
Speaker 4: to focus on how to do this, how to deal
Speaker 4: with the longer term fiscal challenges we face.
Speaker 1: I feel like we could talk about this for the
Speaker 1: next several hours, especially getting your expertise and insight on this,
Speaker 1: but iddink on that point, we'll wrap up this episode
Speaker 1: of Folks and Verdicts. We are extremely grateful to Bill
Speaker 1: for pairing on this episode. Very informative, great discussion for
Speaker 1: all of us, and thank you the listener for taking
Speaker 1: the time to join us, as well as a reminder
Speaker 1: you can read all of our Bloomberg intelligence research on
Speaker 1: the Bloomberg terminal at bi Yo. Thank you all and
Speaker 1: have a great day.