https://www.bloomberg.com/news/videos/2023-05-16/stephanie-kelton-us-is-not-on-cusp-of-debt-limit-deal-videoStephanie Kelton: US is Not on Cusp of Debt Limit Deal
https://www.bloomberg.com/news/videos/2023-05-16/stephanie-kelton-us-is-not-on-cusp-of-debt-limit-deal-video
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00:03>> GREAT TO HAVE YOU WITH US, STEPHANIE KELTON.
00:05WE ARE SEEING MIXED MESSAGES COMING FROM BOTH SIDES.
00:13HOW DO YOU SEE THIS PLAYING OUT? >> IT SEEMS TO BE CHANGING
00:22RAPIDLY FROM ONE MOMENT IT SOUNDS LIKE MAYBE THERE IS
00:25PROGRESS BEING MADE WITH NEGOTIATIONS AND THE NEXT
00:28REPORT WE GET FROM REPORTERS WHO ARE COVERING THESE TALKS,
00:32SOMEBODY WILL COME OUT AND SAY THERE IS NO MOVEMENT.
00:36SPEAKER MCCARTHY WILL COME OUT AND SAY WE ARE BASICALLY
00:40GETTING NOWHERE. SO, I DON'T KNOW.
00:42IT DOES NOT LOOK LIKE WE ARE ON THE CUSP OF A DEAL.
00:55SHERY: FOR OUR GLOBAL AUDIENCE, WHICH
00:57IS GOING TO LOOK AT THE DEBT CEILING NEGOTIATIONS THAT
00:59HAPPEN REGULARLY IN THE U.S., HOW MUCH OF A SENSE OF URGENCY
01:03IS THERE THIS TIME AROUND AS DIFFERENT FROM THE PAST?
01:06THIS IS A USUAL THING IN THE U.S., AS OPPOSED TO OTHER
01:10COUNTRIES.
01:10>> YOU ARE RIGHT. OTHER COUNTRIES AROUND THE
01:15WORLD DON'T DO THIS BECAUSE THEY DON'T HAVE A DEBT CEILING.
01:20WE ARE ONE OF TWO COUNTRIES IN THE ROLE THAT THOSE, THE OTHER
01:23IS DENMARK IN THEY DO NOT USE IT THE WAY WE USE IT.
01:26WE ARE IN A LEAGUE OF OUR OWN. THERE WAS OR CONCERT COUNTRY WE
01:32COULD HAVE PUT ON THE LIST, AUSTRALIA. AUSTRALIA.
01:35THE DEBT CEILING LIMIT THAT WOULD HAVE WORKED ABOUT THE WAY
01:38THE ONE WE HAVE HERE THE U.S. WORKS.
01:43THEY DID THAT IN THE WAKE OF THE 2000 EIGHT FINANCIAL CRISIS
01:44AND IT DID NOT SURVIVE LONG. THE REASON IT DID NOT SURVIVE
01:51IS BECAUSE THEY STARTED, POLITICIANS, STARTED PLAYING
01:52WITH IT THE WAY THE POLITICIANS HERE IN THE U.S. PLAY WITH IT.
01:57WEAPONIZING IT, USING IT TO SCORE POLITICAL POINTS AND SO
01:59FORTH. THEY VERY QUICKLY DECIDED THIS
02:00WAS A HUGE MISTAKE. THEY ABOLISHED IT IN 2013.
02:06I AM WORRIED. I WILL SAY I AM MORE AWARE THAN
02:10I HAVE BEEN IN YEARS PAST. WE HAVE BEEN HERE BEFORE, IN A
02:11SENSE. WE GET RIGHT UP TO THE BRINK
02:17AND THEN IN THE FINAL HOURS, USUALLY CONGRESS COMES TOGETHER
02:18AND AGREES TO RAISE THE DEBT CEILING LIMIT.
02:22THAT IS WHAT I THINK WILL HAPPEN THIS TIME BUT I AM
02:24DEFINITELY MORE WORRIED THAN I HAVE BEEN IN THE PAST. THIS IS
02:28NOT THE CONGRESS OF THREE YEARS AGO OR EVEN 10 YEARS AGO.
02:32THERE IS REAL CAUSE FOR CONCERN. >> YOU TALK ABOUT THIS BECOMING
02:41A WEAPONIZED FORM OF NEGOTIATION.
02:45DO YOU GET GOOD BUDGET POLICY IN THIS WAY?
02:46>> NO. NOT AT ALL.
02:50THE TIME TO MAKE BUDGET POLICY IS IN THE NORMAL BUDGETING
02:59PROCESS.
02:59I SERVED FOR A PERIOD AS THE CHIEF ECONOMIST FOR THE U.S.
03:01SENATE DEMOCRAT BUDGET COMMITTEE.
03:07THERE IS A WAY FOR THEM TO COME TOGETHER AND MAKE DECISIONS
03:08ABOUT SPENDING AND TAX POLICY. THAT IS THE APPROPRIATE FORUM
03:17FOR VIGOROUS DEBATE ABOUT OUR PRIORITIES AND WHETHER WE WANT
03:18TO MAKE SUBSTANTIVE CHANGE. BUT, THIS MOMENT, PLAYING
03:25AROUND WITH THE DEBT CEILING LIMIT IS NOT THE PLACE TO BE
03:26HAVING THOSE NEGOTIATIONS. IT IS NOT WHERE IT SHOULD
03:28HAPPEN. HAIDI:
03:35THIS IS JUST ONE OF THOSE THINGS WE COME AROUND TO WHEN
03:37IT COMES TO U.S. POLITICS AND ECONOMICS.
03:41DOES IT CHIP AWAY AT THE U.S. REPUTATION?
03:49THE IDEA OF A DEADBEAT DEBTOR GETS THROWN AROUND IN THE
03:53CONTEXT OF PRESIDENT BIDEN AND JANET YELLEN SAYING THAT IS NOT
03:54WHAT THE U.S. IS. DOES IT EVENTUALLY HAVE THAT
03:58REPUTATIONAL IMPACT WHEN WE SEE PEOPLE TREATING THIS LIKE JUNK
04:03BONDS?
04:03>> ATENEO. -- I DO NOT KNOW.
04:10IT IS NOT GOOD, REPUTATIONAL HE. ON AN INTERNATIONAL STAGE, AS
04:14THE GLOBAL RESERVE COUNTRY, WE LOOK FRANKLY WERE LIST CARRY ON
04:20FOR MONTHS ON END WITH THE TREASURY SECRETARY THAT HAS TO
04:23CONTINUALLY GO ON TELEVISION WITH A PRESIDENT WHO HAS TO
04:25TAKE QUESTIONS ABOUT WHETHER THE U.S.
04:28IS GOING TO HONOR OBLIGATIONS THAT CONGRESS HAS COMMITTED TO.
04:31THIS IS EMBARRASSING. WE SHOULD STOP DOING.
04:37SHERY: WE SAW WHAT HAPPENED IN 2011
04:41WHEN WE HAD THAT SHOWDOWN AFFECTING CONSUMER SENTIMENT.
04:46NOT TO MENTION THIS SELLOFF IN EQUITIES P HOW HIGHER THE
04:48ECONOMIC STAKES AT THIS POINT WHEN EVERYBODY IS TALKING ABOUT
04:53A POTENTIAL RECESSION WITH THE FED CONTINUING TO TIGHTEN AND
04:54PRICES STILL HIGH?
04:56>> YOU'RE RIGHT. EVERYONE IS TALKING ABOUT
05:02RECESSION AND ONE OF THE THINGS THAT HAS GOTTEN LOST IN THE
05:05DISCUSSION AROUND DEFAULT IS THAT THIS WOULD NOT RESULT IN
05:12THE SORT OF DOWNTURN WE MIGHT DESCRIBE AS ECONOMIC RECESSION.
05:18THIS WOULD BE A SPIRALING DOWNWARD THAT WOULD CULMINATE
05:20IN SOMETHING THAT LOOKS MORE LIKE A DEPRESSION THAN A
05:21RECESSION. IF CONGRESS REFUSES TO RAISE
05:27THE DEBT LIMIT AND THE EXECUTIVE BRANCH DOES NOT TAKE
05:30OTHER OPTIONS THAT ARE AVAILABLE TO IT, SO IN A SENSE
05:35IT SAYS OK, YOU ARE FORCING US TO CUT SPENDING TO MATCH
05:38REVENUE BECAUSE WE ARE NOT GOING TO ISSUE NEW BONDS, AND
05:43SO WE ARE GOING TO BE FORCED TO SPEND ONLY WHAT IS COMING IN IN
05:44TERMS OF TAX REVENUE. THAT FORCES A HUGE CUT IN
05:48SPENDING. IMMEDIATELY, RIPPLING THROUGH
05:51THE ECONOMY. THAT SPENDING WAS SOMEBODY'S
05:54INCOME.
06:00NOW THOSE FOLKS WILL SPEND LESS, SO THE ECONOMY WILL
06:03RETRACT AND THAT WILL PULL TAX REVENUE DOWN AND FORCE ANOTHER
06:05ROUND OF SPENDING CUTS TO MEET THE LOWER REVENUE AND RINSE AND
06:09REPEAT, DOWN, DOWN YOU GO. THERE WOULD BE NO END IN SIGHT.
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