WEBVTT - Episode 9: The U.S. Government's $18 Trillion Debt Problem 0:00:00.080 --> 0:00:02.520 The phony bookkeeping goes merrily on. You know, we borrow 0:00:02.560 --> 0:00:05.200 money from the Social Security Trust Fund and we call 0:00:05.280 --> 0:00:08.959 it income Now corporation did something like that, the management 0:00:08.960 --> 0:00:11.160 would all be watching each other's laundry and club fed. 0:00:15.320 --> 0:00:18.279 Hi and welcome back to Bloomberg Benchmark, a podcast about 0:00:18.280 --> 0:00:22.320 the global economy. It's Thursday, October Tween night. I'm Tori Stillwell, 0:00:22.520 --> 0:00:25.959 the US economics reporter in DC with Bloomberg News. I'm 0:00:26.000 --> 0:00:29.319 with my colleagues inco hosts Dan Moss, our executive editor 0:00:29.360 --> 0:00:32.600 for International Economics here in d C with me and Akiedo, 0:00:32.720 --> 0:00:37.280 our editor for Benchmark in San Francisco. Hello, Tory, how's 0:00:37.280 --> 0:00:40.080 it going. It's going. You know, it's pretty it's pretty 0:00:40.159 --> 0:00:43.520 miserable weather here and just waiting for a debt deal 0:00:43.560 --> 0:00:47.920 to come down, so you know the usual. Well, this 0:00:48.000 --> 0:00:52.200 has been another very exciting week in the global economy. Um, Dan, 0:00:52.280 --> 0:00:54.920 what's cut your eye over the past week? I was 0:00:54.960 --> 0:00:59.600 looking at the Ali Baba earnings released yesterday. The general 0:00:59.760 --> 0:01:02.160 nar clity of was that Ali Barbera hit it out 0:01:02.200 --> 0:01:05.160 of the park. Sales were up by almost a third 0:01:05.840 --> 0:01:12.199 despite a slowing Chinese economy, Defying the slowdown overcoming the slowdown. 0:01:12.840 --> 0:01:17.240 And yes it's true China's headline GDP is slowing, but 0:01:17.440 --> 0:01:21.040 the mix of what's driving Chinese growth has changed dramatically 0:01:21.040 --> 0:01:27.080 in recent years. Services now accounts for more than half consumption, 0:01:27.319 --> 0:01:31.520 which is what Ali Barbera is is doing pretty well, 0:01:31.600 --> 0:01:36.800 getting stronger, exports getting weaker, manufacturing getting weaker, fixed their sets, 0:01:36.880 --> 0:01:40.920 investment getting weaker. So it's not that Ali Barbera overcame 0:01:41.000 --> 0:01:45.240 the slowdown. Ali barber is the Chinese economy. Yeah, that's 0:01:45.280 --> 0:01:48.080 a great point, and that's also a great plug for 0:01:48.120 --> 0:01:52.600 our second episode on the Chinese financial market crisis for 0:01:53.000 --> 0:01:55.840 people who haven't digging to listen to that show yet, 0:01:55.920 --> 0:01:59.360 which I get out tor, what's been interesting for you? Yeah? 0:01:59.360 --> 0:02:02.160 I want to share from services to goods. We got 0:02:02.200 --> 0:02:06.720 the Advanced Trade report this morning, so that be Wednesday morning, 0:02:07.200 --> 0:02:11.560 and before your eyes glaze over, I swear it's interesting 0:02:12.880 --> 0:02:17.200 the US merchandise trade deficits, so for goods it actually 0:02:17.720 --> 0:02:23.120 shrank um and that was due to higher exports. Shipments 0:02:23.120 --> 0:02:26.320 of goods to overseas customers climbed two point four percent, 0:02:26.480 --> 0:02:30.360 which is the biggest increase since March. And this is 0:02:30.480 --> 0:02:33.840 great news because you know, we've talked in many episodes 0:02:33.840 --> 0:02:36.000 about there being a strong dollar and that being bad 0:02:36.000 --> 0:02:39.200 for manufacturers here because it makes them goods more expensive 0:02:39.360 --> 0:02:42.840 to foreign customers. Some of that may be starting to abate, 0:02:42.919 --> 0:02:45.920 which would be excellent news for our economy. Well, you, guys, 0:02:45.960 --> 0:02:48.320 I wanted to talk about the deal that the White 0:02:48.360 --> 0:02:52.560 House made with Republicans. They reached this deal late Monday 0:02:52.639 --> 0:02:56.799 night to raise the eighteen point one trillion dollar debt 0:02:56.840 --> 0:02:59.919 ceiling and thus prevent the US government from de fall 0:03:00.000 --> 0:03:02.880 thing on its debt. So yeah, the government was able 0:03:02.960 --> 0:03:06.639 to avoid a lot of potential chaos with with the steal. 0:03:07.120 --> 0:03:10.240 But first let's introduce our guests. John Steel Gordon, a 0:03:10.360 --> 0:03:14.480 historian and author of the book Hamilton's Blessing, The Extraordinary 0:03:14.560 --> 0:03:17.880 Life and Times of our National Debt. Hello John, Hello, 0:03:17.880 --> 0:03:20.000 I'm glad to be here for people who are listening 0:03:20.120 --> 0:03:22.240 and are like I know that the death ceiling is 0:03:22.240 --> 0:03:25.800 a big deal, but I don't quite know what it is. Tori. 0:03:25.880 --> 0:03:28.600 Can you can you give a quick explainer on what 0:03:28.800 --> 0:03:32.520 exactly this mysterious term is. Yes, I will do you 0:03:32.680 --> 0:03:35.280 one better. I will define a couple of terms. So 0:03:35.360 --> 0:03:38.280 we have all our ducks in our own. So the 0:03:38.360 --> 0:03:43.040 debt is just the total of federal budget deficits you 0:03:43.080 --> 0:03:47.320 know throughout history, minus federal budget surpluses. That's all of 0:03:47.320 --> 0:03:51.400 them put together. Now, the deficit is just how much 0:03:51.600 --> 0:03:56.920 spending exceeds revenues in one given fiscal year. And that's 0:03:57.000 --> 0:03:58.960 that's sort of easy to imagine as a consumer, how 0:03:59.040 --> 0:04:01.120 much you're spending versus how much you're getting in. So 0:04:01.200 --> 0:04:04.560 you can have a surplus and it's still to exactly 0:04:04.720 --> 0:04:06.680 for for one year. You can have a surplus and 0:04:06.680 --> 0:04:10.480 they're still debt exactly. UM. Now, the debt ceiling is 0:04:10.520 --> 0:04:13.800 the legal limit on how much total debt the government 0:04:13.840 --> 0:04:17.120 can issue. And that's not just the amounts borrowed in 0:04:17.160 --> 0:04:23.039 credit markets, but also insecurities treasuries issued to UM other 0:04:23.080 --> 0:04:26.520 parts of the government for example, John, how many countries 0:04:26.560 --> 0:04:29.400 have a debt ceiling? Is this a unique situation here? 0:04:29.600 --> 0:04:31.640 It's it's the only one that I know of, UM, 0:04:31.720 --> 0:04:34.040 And that may be because we have a presidential um 0:04:34.240 --> 0:04:37.279 form of government as opposed to a parliamentary form of 0:04:37.320 --> 0:04:40.120 government where the where the government and the parliament are 0:04:40.200 --> 0:04:43.280 essentially one and the same, and so they don't need 0:04:43.320 --> 0:04:45.359 a debt ceiling. Why do we have it in the 0:04:45.440 --> 0:04:48.800 first place, and what are the pros and cons of it? Well, 0:04:48.800 --> 0:04:53.320 the death ceiling. Before nineteen seventeen, Congress authorized all issue 0:04:53.360 --> 0:04:55.760 of debt. If the Treasury wanted to issue you know, 0:04:55.800 --> 0:04:58.360 a billion dollars worth of treasury bonds, that Congress had 0:04:58.400 --> 0:05:00.880 to say, Okay, you can spend it on building bridges 0:05:00.960 --> 0:05:03.599 or whatever. And then in nineteen seventeen they put a 0:05:03.640 --> 0:05:06.520 limit on the various forms of debt. I mean, how 0:05:06.520 --> 0:05:09.480 many Treasury bills, how many Treasury notes, how many Treasury 0:05:09.520 --> 0:05:13.000 bonds um the Treasury could issue. And then in nineteen 0:05:13.040 --> 0:05:15.560 thirty nine they established the debt ceiling, and you know, 0:05:15.600 --> 0:05:19.080 the total debt cannot exceed this number without Congressional permission. 0:05:19.320 --> 0:05:22.240 This seems like it was just kind of a control measure, 0:05:22.440 --> 0:05:26.359 like Congress wanting some measure of control over what the 0:05:26.360 --> 0:05:30.400 Treasury is doing. Yes, um, that's that's the point of it. 0:05:30.440 --> 0:05:34.680 But of course, if Congress appropriates money to spend um, 0:05:34.760 --> 0:05:37.240 and then it has to provide the money to do 0:05:37.279 --> 0:05:40.000 the spending. And if you don't don't have the you know, 0:05:40.160 --> 0:05:42.320 tax revenues coming in, and you have no choice but 0:05:42.400 --> 0:05:44.919 to borrow the money. So it's kind of a you know, 0:05:45.040 --> 0:05:47.960 dog chasing its tail kind of a thing. John, Was 0:05:47.960 --> 0:05:52.000 it always this contentious, No, not usually. It's in the 0:05:52.080 --> 0:05:55.200 last UMF twenty years that has really gotten heated, and 0:05:55.360 --> 0:05:59.719 especially under Obama. How do you account for that? Well, 0:05:59.760 --> 0:06:04.400 I've I think partly it's the American politics is polarizing. 0:06:05.000 --> 0:06:06.640 You know. It used to be used to have liberal 0:06:06.680 --> 0:06:11.280 Democrats and conservative Democrats and liberal Republicans and conservative Republicans. 0:06:11.279 --> 0:06:15.159 You don't anymore. Old Democrats are liberal, Republicans are conservative. Yeah, 0:06:15.240 --> 0:06:17.800 And for our listeners, let's just sort of establish where 0:06:17.800 --> 0:06:22.640 we are in the In the debt ceiling talks in Washington, UM, 0:06:23.040 --> 0:06:25.560 the Republicans and the White House came to agreement, az 0:06:25.560 --> 0:06:28.279 Aki said, And so now it's got to pass both 0:06:28.320 --> 0:06:32.000 the House and the Senate. UM. Our congressional reporters say 0:06:32.040 --> 0:06:35.480 that will probably happen in the House sometime Wednesday today, 0:06:35.480 --> 0:06:39.200 the day we're recording, and then it'll have to go 0:06:39.279 --> 0:06:41.680 to the Senate for approval as well. And they have 0:06:41.880 --> 0:06:46.320 until November three is our deadline. Basically, that's before the 0:06:46.440 --> 0:06:50.080 US gets very close to defaulting on its obligations, which 0:06:50.080 --> 0:06:54.760 would be an extraordinarily bad scenario. Let's back up a 0:06:54.800 --> 0:06:58.120 little bit here. When I first learned what the debt 0:06:58.160 --> 0:07:02.560 ceiling was, I was astonished, because every year Congress decides 0:07:02.680 --> 0:07:05.080 on the budget, you know, it decides on how much 0:07:05.080 --> 0:07:08.080 it wants to spend and how much approximately it's going 0:07:08.120 --> 0:07:11.400 to take in and revenue, and then decides, uh, these 0:07:11.560 --> 0:07:14.080 are the bonds that we have to issue in order 0:07:14.120 --> 0:07:17.560 to borrow enough to actually be able to spend that 0:07:17.600 --> 0:07:20.240 amount of money. So they already decide on all of this, 0:07:20.520 --> 0:07:23.240 and then later they also have to go through this 0:07:23.360 --> 0:07:28.880 thing where they authorize the amount that the of the 0:07:28.920 --> 0:07:32.720 total total debt of the government. And it just seems 0:07:32.800 --> 0:07:36.160 like this very weird thing where you already say that 0:07:36.240 --> 0:07:38.640 you're going to spend this amount and you already decide 0:07:38.680 --> 0:07:40.120 on it, but then you have to go through this 0:07:40.240 --> 0:07:44.320 separate process of then getting approval to do all of 0:07:44.360 --> 0:07:47.640 that all over again. It's so confusing to me, very bizarre. 0:07:47.880 --> 0:07:50.120 Probably has something to do with getting good headlines the 0:07:50.160 --> 0:07:54.880 next morning you can spending John, do you think things 0:07:54.920 --> 0:07:56.800 would be better if we just got rid of this 0:07:56.960 --> 0:07:59.679 debt ceiling altogether or if we just kind of tried 0:07:59.760 --> 0:08:03.920 to meld it in together with the budget making process. Yes, 0:08:03.960 --> 0:08:07.960 I do, because I think it's now become a political football, um, 0:08:08.000 --> 0:08:10.560 and it doesn't serve any purpose other than to get 0:08:10.600 --> 0:08:13.080 politicians to get good headlines the next morning, which is 0:08:13.160 --> 0:08:16.680 of course half of politics. I guess every every year 0:08:16.760 --> 0:08:19.480 when this issue comes up, it does give us a 0:08:19.520 --> 0:08:23.080 good chance, though, to reflect on how much the US 0:08:23.160 --> 0:08:29.520 government owes to everyone else, both US citizens and US 0:08:29.600 --> 0:08:34.880 businesses and companies and individuals around the world. Tori, do 0:08:34.880 --> 0:08:38.120 you want to give us a quick primer on what 0:08:38.200 --> 0:08:42.240 this debt looks like? Now? Yes, sell debt comes in 0:08:42.520 --> 0:08:46.200 many different shades, and there's many different labels for the 0:08:46.200 --> 0:08:48.679 different kinds of debt. So I'll walk through a couple 0:08:48.760 --> 0:08:52.480 of them. So, the US public debt subject to limit, 0:08:52.720 --> 0:08:57.880 which includes um even debt that is accumulated when parts 0:08:57.880 --> 0:09:01.040 of the government borrow or lend from or to other 0:09:01.080 --> 0:09:04.360 parts of the government. So that amount right there is 0:09:04.400 --> 0:09:07.560 eighteen point one trillion dollars right now, and that's right 0:09:07.679 --> 0:09:10.480 at the limit that is the debt ceiling right there. 0:09:11.160 --> 0:09:15.120 That's a lot of money. Yeah. Then we have the 0:09:15.240 --> 0:09:19.240 US public debt held by the public, and this is uh, 0:09:19.280 --> 0:09:22.240 this is more often used by economists. This is what 0:09:22.280 --> 0:09:25.800 people are really concerned about. And this is thirteen trillion 0:09:25.840 --> 0:09:30.439 dollars um. To give you some context, before the recession 0:09:31.040 --> 0:09:34.360 um in December two thousand seven, that number was five 0:09:34.440 --> 0:09:38.480 point one trillion dollars. So we've we've more than doubled 0:09:38.720 --> 0:09:41.800 that level since then, and you know that has to 0:09:41.840 --> 0:09:45.520 do with revenues decreasing during the recession. Also, you know 0:09:45.559 --> 0:09:48.000 we spent to try to get the economy going back 0:09:48.080 --> 0:09:52.640 up again, so we've definitely seen debt balloon recently. Let's 0:09:52.640 --> 0:09:56.640 put these numbers into some kind of perspective, because taken 0:09:56.679 --> 0:10:01.200 in and of themselves, they sound stratus eric. But how 0:10:01.280 --> 0:10:05.360 is the US doing relative to other major economies? Is 0:10:05.360 --> 0:10:08.400 that a lot of debt? Is it average? Is it 0:10:08.480 --> 0:10:13.880 not very much? It's well above average. We're currently about 0:10:13.920 --> 0:10:16.199 a hundred and three hundred four percent of g d P. 0:10:16.800 --> 0:10:19.240 There are countries in worthshape. Greece is a hundred and 0:10:19.240 --> 0:10:22.480 fifty eight percent, Japan is about a hundred and seventy 0:10:22.480 --> 0:10:26.280 four percent. But Japan, the Japanese are very thrifty people, 0:10:26.360 --> 0:10:30.480 and the Japanese national debt is almost entirely internally held. 0:10:31.240 --> 0:10:34.600 The UK is around ninety percent, Frances around eighty six percent. 0:10:34.960 --> 0:10:37.600 These numbers have all been getting steadily worse over the 0:10:37.679 --> 0:10:41.240 last um several decades, and it's important to look at 0:10:41.280 --> 0:10:45.280 these debt to GDP ratios instead of just the absolute 0:10:45.320 --> 0:10:49.080 amount in trillions of dollars. Because your economy produces a 0:10:49.080 --> 0:10:51.720 lot every year and you have some amount of debt, 0:10:51.760 --> 0:10:54.720 that's totally fine. But if your economy doesn't produce a 0:10:54.760 --> 0:10:57.400 whole lot, but the debt size is actually a lot, 0:10:57.800 --> 0:11:00.640 that's when you're kind of in trouble. But on Japan 0:11:00.679 --> 0:11:03.360 and Act, you may also be able to provide some 0:11:03.440 --> 0:11:09.000 perspective of this. Shouldn't it to GDP of the magnitude 0:11:09.040 --> 0:11:13.320 that John does just described If you believe half of 0:11:13.360 --> 0:11:16.160 what's said about the US debt, shouldn't that be leading 0:11:16.200 --> 0:11:20.520 to a catastrophe in Japan? Yet Japanese bonds are in 0:11:20.679 --> 0:11:24.480 more demand than ever. The country is not falling apart. 0:11:25.559 --> 0:11:27.720 Why is it such a big deal. So part of 0:11:27.760 --> 0:11:31.120 the reason why people aren't panicked about Japan right now 0:11:31.200 --> 0:11:33.599 is because, like John said, most of the debt is 0:11:33.640 --> 0:11:37.679 actually owed to its own citizens, its own companies. So 0:11:37.720 --> 0:11:39.679 when the death's kind of internal like that, you're just 0:11:39.840 --> 0:11:42.000 it's kind of like you're pushing money around within the 0:11:42.040 --> 0:11:44.960 same country, it's not that big of a deal. Whereas 0:11:45.040 --> 0:11:47.880 when you have foreign investors, that's when things get a 0:11:47.920 --> 0:11:50.559 little bit more worrying. That was the case for Greece, 0:11:50.679 --> 0:11:54.120 that was the case for Spain, etcetera during the European 0:11:54.120 --> 0:11:57.480 sovereign debt crisis. UM. But at the end of the day, 0:11:57.520 --> 0:12:00.560 this is really about market psychology. You know, investors can 0:12:00.559 --> 0:12:03.400 really wake up tomorrow and decide that the US or 0:12:03.480 --> 0:12:08.120 Japan or any of these other countries just aren't trustworthy anymore, 0:12:08.480 --> 0:12:11.360 and that's when interest rates go up very quickly and 0:12:11.440 --> 0:12:15.160 you quickly tumble into a financial crisis. I suppose they could. 0:12:15.200 --> 0:12:18.640 But don't you think comparisons with Greece and Spain are 0:12:18.679 --> 0:12:22.880 somewhat exaggerated. I mean, here in the US, we or 0:12:23.000 --> 0:12:26.840 you do actually control your own currency. That's not the 0:12:26.880 --> 0:12:30.120 case in Greece and not the case in Spain. John, 0:12:30.160 --> 0:12:32.319 what do you think of those comparisons, Well, I think 0:12:32.360 --> 0:12:35.320 that's perfectly true. I mean, we are the reserve currency 0:12:35.320 --> 0:12:39.000 and that is a huge economic advantage for US UM 0:12:39.040 --> 0:12:41.080 and there's no other country that really could provide the 0:12:41.080 --> 0:12:44.360 reserve currency at this point, so we're very lucky in 0:12:44.360 --> 0:12:49.280 that regard. So we're okay for now. Well, we can 0:12:49.320 --> 0:12:52.840 afford the debt right now because interest rates are extraordinarily 0:12:52.880 --> 0:12:54.960 low and have been for several years. But if they 0:12:55.000 --> 0:12:58.839 go back up to normal rates, suddenly the interest on 0:12:58.880 --> 0:13:00.480 the debt is going to be eating up an awful 0:13:00.480 --> 0:13:04.280 lot of tax revenue. How worried should we be about 0:13:04.320 --> 0:13:06.839 the size of the US debt? I think we should 0:13:06.840 --> 0:13:09.520 be moderately worried about it. It's not a crisis, but 0:13:09.600 --> 0:13:12.880 it can quickly become one. And what are we borrowing 0:13:12.920 --> 0:13:16.200 this money for. In the nineteenth century, we use the 0:13:16.280 --> 0:13:18.679 national debt to save the Union, you know. In the 0:13:18.720 --> 0:13:21.240 nineteen thirties we used it to save the American economy. 0:13:21.440 --> 0:13:23.800 In the nineteen four Days, we used it to save 0:13:23.840 --> 0:13:26.520 the world. What have we spent this all this money on? 0:13:26.600 --> 0:13:29.719 In nineteen seventy the national debt was of g d P. 0:13:30.200 --> 0:13:33.920 Today it's over and we've had no great war, no 0:13:34.040 --> 0:13:37.600 great depression. But we do have an aging population. We 0:13:37.679 --> 0:13:40.040 do have an aging population, but it's not as bad 0:13:40.080 --> 0:13:42.640 as say Japan is at the moment. And so what 0:13:42.679 --> 0:13:45.320 we've basically done is we have borrowed money from our 0:13:45.360 --> 0:13:49.160 grandchildren so that we can enjoy it today. And you know, 0:13:49.160 --> 0:13:53.000 don't forget today's borrowing is necessarily tomorrow's taxes. We're taking 0:13:53.000 --> 0:13:54.840 this money from our grandchildren so that we can have 0:13:54.840 --> 0:13:58.600 a nice lifestyle. When I when I talked to an 0:13:58.600 --> 0:14:03.200 economist yesterday, John Nale over at LPL Financial, he told 0:14:03.200 --> 0:14:07.160 me that when he talks to clients UM and investors, 0:14:07.760 --> 0:14:12.240 the debt is the number one question that people have 0:14:12.360 --> 0:14:14.120 for him. It is the thing that people are most 0:14:14.160 --> 0:14:16.800 worried about. Do you think that's why that is? It's 0:14:16.840 --> 0:14:20.000 just this whole feeling that it's getting unsustainable and it's 0:14:20.040 --> 0:14:23.160 getting out of hand, and it jeopardizes serve the U 0:14:23.240 --> 0:14:25.000 S as we know it, and just kind of curious 0:14:25.040 --> 0:14:27.800 why they would be so worried about it. Why that's 0:14:27.800 --> 0:14:30.680 the first question. Well, I think one thing is that 0:14:30.760 --> 0:14:34.000 this could this could suddenly become a crisis, very very quickly. 0:14:34.480 --> 0:14:37.800 It's again it's psychology. I mean, in the nineteen seventies, 0:14:37.880 --> 0:14:40.960 New York City trotted on down to Wall Street and 0:14:41.080 --> 0:14:44.760 asked to borrow more money. UM and Wall Street just said, sorry, 0:14:44.840 --> 0:14:47.200 we're not lending the City of New York any more money. 0:14:47.720 --> 0:14:51.200 And suddenly it was forward the city dropped debt. Fortunately, 0:14:51.240 --> 0:14:53.840 the State of New York bailed out New York City 0:14:54.240 --> 0:14:56.560 and put it under strict control. I mean, one thing 0:14:56.600 --> 0:14:58.640 they did was required New York City to keep its 0:14:58.680 --> 0:15:01.800 books according to generally accept at accounting principles. It would 0:15:01.800 --> 0:15:03.920 certainly help if the federal government had to do that. 0:15:04.440 --> 0:15:06.600 What they don't. You know, you know those surpluses we 0:15:06.600 --> 0:15:10.360 had in nine, two thousand, two thousand one, the national 0:15:10.400 --> 0:15:13.200 debt went up every one of those years. Now, how 0:15:13.200 --> 0:15:15.120 can you be running a surplus and yet you're debt 0:15:15.160 --> 0:15:17.520 is increasing? It was phony bookkeeping is how you do it. 0:15:18.080 --> 0:15:21.280 And the phony bookkeeping ended in two thousand and one. No, 0:15:21.440 --> 0:15:24.720 that's when we slipped into deafic set again. Now the 0:15:24.720 --> 0:15:27.080 phony bookkeeping goes merrily on, and you know, we borrow 0:15:27.120 --> 0:15:29.760 money from the Social Security Trust Fund and we call 0:15:29.840 --> 0:15:32.640 it income. Now a corporation did something like that, the 0:15:33.080 --> 0:15:35.800 management would all be watching each other's laundry and club fed. 0:15:36.880 --> 0:15:39.720 I'm wondering. You know, this is a conversation with a 0:15:39.760 --> 0:15:44.040 lot of numbers and a lot of vocabulary. That's pretty difficult. 0:15:44.280 --> 0:15:47.520 Talking about sovereign debt is not my favorite thing in 0:15:47.520 --> 0:15:50.520 the world, because it's so complicated. But if you're a 0:15:50.560 --> 0:15:54.520 normal person out there, if you're like a normal American citizen, Um, 0:15:55.240 --> 0:15:57.680 why should you care about the debt ceiling? And why 0:15:57.760 --> 0:16:00.520 should you care about the US debt? I think the 0:16:00.560 --> 0:16:03.480 debt ceiling is they don't care about it. Most people 0:16:03.520 --> 0:16:06.160 don't care about politics, and people who do care about 0:16:06.160 --> 0:16:10.000 politics find that absolutely incomprehensible. But ninety percent of the 0:16:10.000 --> 0:16:12.960 American people don't like politics very much. It's sort of 0:16:13.400 --> 0:16:15.000 now they deal with it as much as they have to, 0:16:15.080 --> 0:16:16.800 sort of like nobody likes going to the dentist, but 0:16:16.880 --> 0:16:19.600 we do. Anyway, I can personally attest to that. Well, 0:16:19.640 --> 0:16:22.880 I'm wondering, John, what do you think Alexander Hamilton's would 0:16:22.880 --> 0:16:25.520 have said if there was a time machine that he 0:16:25.600 --> 0:16:30.240 teleported into modern day America and saw that the US 0:16:30.280 --> 0:16:33.440 debt is now around eighteen trillion dollars and that the 0:16:33.480 --> 0:16:38.960 debt ceiling becomes this huge political debating point every year. Well, 0:16:39.000 --> 0:16:41.320 I mean, Alexander Hamilton's said that you know that the 0:16:41.440 --> 0:16:44.000 national debt, if it is not excessive, will be to 0:16:44.120 --> 0:16:46.840 us a national blessing, and it has many times proved 0:16:46.840 --> 0:16:48.720 to be exactly that we could not have won the 0:16:48.760 --> 0:16:52.480 Civil War without it. Now what Hamilton's who died in 0:16:52.560 --> 0:16:55.600 eighteen o four, would say about twenty fifteen, I think 0:16:55.600 --> 0:16:58.640 he'd be probably more interested in things like airplanes and 0:16:59.120 --> 0:17:03.080 television and ray idea and what have you and snapchat. Right. 0:17:03.440 --> 0:17:07.440 There are a number of prominent economists, such as Paul Krookman, 0:17:07.440 --> 0:17:10.879 though he's not the only one who would say, with 0:17:10.960 --> 0:17:14.200 interest rates the slow ought we not be borrowing to invest? 0:17:14.359 --> 0:17:17.320 What would hamilton have made of that? Well on thing, 0:17:17.400 --> 0:17:21.080 about one third of the national debt turns over every 0:17:21.080 --> 0:17:24.000 couple of years UM, so it wouldn't be very long 0:17:24.080 --> 0:17:26.760 before if interest rates go back up to normal, when 0:17:26.760 --> 0:17:29.800 the amount of tax revenue needed to service the debt 0:17:29.800 --> 0:17:33.240 would go straight up. And then you know, either we 0:17:33.680 --> 0:17:38.240 keep borrowing um and pretending everything's fine, or there has 0:17:38.280 --> 0:17:42.160 to be drastic tax increases which would certainly slow the economy, 0:17:42.280 --> 0:17:44.280 or there's going to have to be big government cuts 0:17:44.480 --> 0:17:47.520 which would also slow the economy. So we better to 0:17:47.960 --> 0:17:50.880 do something about his starting now. But I wouldn't hold 0:17:50.920 --> 0:17:54.200 my brand well. I want to end on a light note. 0:17:54.400 --> 0:17:58.600 Have you seen that Hamilton's and musical yet? I have not? Um, 0:17:58.600 --> 0:18:00.960 I hear it's very good hip hop. Not exactly my 0:18:01.640 --> 0:18:05.800 kind of music. I'm more Rogers and Hamistan musical type. Um, 0:18:05.800 --> 0:18:08.600 but everybody was saying it said it was absolutely great. Yeah. 0:18:08.640 --> 0:18:10.719 I saw it a few weeks back back in August 0:18:10.840 --> 0:18:13.919 and it's it's amazing. I am going to plug it. 0:18:13.960 --> 0:18:15.720 I'm gonna say that you should watch it. The hip 0:18:15.760 --> 0:18:20.399 hop is it's very well done and uh it's hilarious 0:18:20.440 --> 0:18:23.240 to boot. So on that note, thank you so much 0:18:23.280 --> 0:18:27.000 for joining us. Thank you, and thanks to all of 0:18:27.000 --> 0:18:29.440 you for listening to Bloomberg Benchmark. We will be back 0:18:29.480 --> 0:18:34.160 next week. You can find us on Bloomberg dot com, iTunes, Podecast, SoundCloud, Stitcher, 0:18:34.280 --> 0:18:37.640 and many other places. If you're on iTunes, please take 0:18:37.680 --> 0:18:40.080 a moment to rate and review the show. That really 0:18:40.119 --> 0:18:43.600 helps other listeners discover us and let us know what 0:18:43.640 --> 0:18:45.600 you thought of the show. You can reach us and 0:18:45.640 --> 0:18:48.880 follow us on Twitter at Daniel Mass, d C, Tori 0:18:49.040 --> 0:18:56.880 Stillwell and Akio seven. See you next week.