Should Congress Abolish the Debt Ceiling?

[Music] hi everybody and welcome to open to debate I'm John donvan and it seems to happen now every few years doesn't it Congress and the White House get into a game of chicken over something called drumroll the debt ceiling oh boy that sounds exciting but actually it does get exciting and not in a good way because if the two sides cannot reach an agreement on government spending then all of us just crash into a government that's running out of money or it has run out of money so we're going to debate this debt ceiling thing but first we want to get clear on what it is we're talking about so of course the government needs money to run and of course it gets that money from us the taxpayers year after year but year after year almost always the money raised from taxes isn't enough to meet what the government wants to spend so the U.S borrows the rest of it now legally it cannot just keep borrowing endlessly because Congress puts a ceiling to the amount of debt that the government can pile up ceiling debt debt ceiling but sometimes the government needs more than the debt ceiling allows so what has happened in the past is that Congress ultimately raises the debt ceiling sometimes it's been just in the nick of time just before the oncoming financial and possibly social catastrophe most critically the thing that is dreaded but has never happened yet is that the U.S treasury would not have the money to pay the interest on the debt it already owes it's a default the US government default would be a major unprecedented disaster for everybody and it would lead to a recession it would be felt globally it would hurt the dollar it would hurt all those people who have lent money to the U.S those are the stakes so what about that debt ceiling and the role it plays in this debate the question we're asking is whether our debt ceiling as a thing makes sense we have two Debaters answering opposite ways yes and no to this question should Congress abolish the debt ceiling so let's get into it and meet our Debaters arguing that the answer to that question is yes Mark Zandy Mark is a pass debater with our program it's great to have you back Mark so thanks so much for joining us thanks John it's good to be with you and answering no to the question should Congress abolish the debt ceiling Parker Shepard Parker thanks again to you for joining us on open to debate yeah thanks Sean I'm glad to be here so before we get started I just want to get a sense from both of you about what motivates you to make this argument to participate in this debate to be open to debate so Mark what's the seat from which you're watching all of this go on well uh John I'm the chief Economist of Moody's Analytics which includes the rating agency Moody's investor service and as an economist uh clearly the debt limit all things federal government budget related matter significantly to the economy particularly now the economy is struggling to avoid recession and is fragile and the debt limit debate is particularly important in terms of how the economy is going to perform and of course the rating agency rates treasury debt uh in all debt even you know debt of entities institutions that are backstopped by the federal government explicitly or implicitly so a great deal of interest uh there on how this is all going to play out going forward okay thanks very much for sharing that Insight Mark and Parker Shepard for you what's the seat from what you're watching all of this go on well I uh I graduated college in 2008 so part of my initial study of Economics was watching the last financial crisis unfold real time and that was a a huge motivating factor for me in in getting into studying economics watching that unfold while I was in graduate school and so looking at how debt and default drives the economy how we can take steps to avoid that occurring in the U.S is is top of mind right now as director of the center for data analysis at the Heritage Foundation we're primarily concerned about making sure that we're finding a way for the government to reach a sustainable level to have an opportunity for the economy to grow to look at individual prosperity and make sure that an oversized debt doesn't threaten the financial future of typical American families well it's good to see that both of you have a passion for this topic and a sense of responsibility for it as well so let's go on to our opening statements again our question is should Congress abolish the debt ceiling we're going to ask you mark to go up first you're answering yes to that question and please tell us why I think it's pretty clear I'm not a fan of the doubt limit and I do think it should be abolished that might be a a political or legal Bridge Too Far So barring abolishment I would argue that we should work to amend it or effectively neuter it first I think the dental drama the political theater that is involved in all debt limit battles that we've experienced certainly in recent years and decades is very counterproductive you know even if there's no breach even if Congress and the administration at a Time come together pass legislations or increase or suspend the limit the drama itself is becoming increasingly corrosive on the economy you can see in the current context of the yield on one month's treasury Securities these are securities that will mature on the other side of the X date the date when the treasury runs out of cash to pay everyone on time every risen quite considerably over the last few weeks they're up two percentage points from where they were a month ago that's real money uh you know to taxpayers and that's just you know indicative of the cost I I also think just based on my relationships with my clients who are large institutions large banks financial Physicians and corporations that they're spending energy on time thinking about uh what happens if there is a breach what if funding markets the sources of their cash are disrupted and they're spending energy and time on that and working on those issues as opposed to the kinds of things that they need to be like improving their products and services and making their businesses more productive and more resilient to the challenges that they face and it undermines confidence uh people are nervous uh you know people are already crisis fatigue given everything that we've gone through and this is just one more burden for them to Bear you can see it in many of the consumer sentiment surveys and that can't be good you know for for them financially or for them psychologically um second reason uh is uh it raises the odds that there will be a breach uh that at some point lawmakers take this drama too far uh in the game of chicken that they play every couple years or so ends in a in with a crash and a breach would um I think be very costly uh to the to the economy I mean obviously the scenarios here are numerous some much darker than the others but uh under any scenario if we breach we got a problem and the breach could happen just by mistake and again you can see that in the current context we have some lawmakers arguing that they're going to do everything they can to slow down the legislative process to make sure that this doesn't get through could I jump in to ask you just for the general audience to deter to Define what you mean when you use the term breach because you've used it several times yeah no not absolutely reaching my definition is when uh we get to the so-called X date the day when the treasury doesn't have enough cash on hand to pay all of the bills on time that's a breach the default is when the treasury decides that it will not pay bondholders the default is a breach but it's a much more serious uh breach and we can talk about all of that thank you for that and Mark you've hit your four minutes so I have to break in and uh and give Parker his turn but you can continue your thoughts in our general discussion Parker um Shepard you're answering no in answer to the question should Congress abolish the debt ceiling and please tell us why you're a no I want to start off by remembering that the the fact that the debt ceiling exists was a way for Congress to introduce it to make it easier for the federal government to issue debt prior to 1917 Congress authorized each individual bond issue every time that the government needed to issue new debt so part of the question that we need to talk about when we're going to answer whether we should abolish the debt ceiling is is what is the mechanism that's going to replace it we could go back to something that is that like what existed before 1917 where Congress needed to authorize each bond issue and I I think Mark is shares the sentiments of a lot of of Americans that watch the political theater that is the build up every time that we get close to the debt ceiling and if we had something that more like the regime prior to 1917 maybe that means that it's not so much of a big deal the drawback there is that we would regularly be bumping up against the debt ceiling and it could be um could be a way to introduce this into the debate more frequently you know another alternative would be to go to something like the Gephart rule which said that when Congress passes the budget it automatically deems for there to be an increase in the ceiling commensurate with it or some people are just floating what they've done in the past couple of years when they've suspended the debt limit for a fixed period of time or suspending it indefinitely and I think if we did something like that that would remove the the benefit of having the government come back to reevaluate the fiscal situation that has occurred between when uh when a budget was passed and when we've reached a debt limit and that's that's necessary because much of the federal budget is already on autopilot uh mandatory spending is not subject to annual Appropriations bills that's about 60 percent of outlays it's mostly major health care programs social security income security and student loans so we have to address the spending that's already on autopilot and and we the distinction about the default and breach is actually timely we can leave the debt ceiling in place and not risk default um because there's plenty of Revenue coming in to make payments on the debt the interest payments are about 20 percent of current receipts treasury has a separate payment system for debt so there's there is that distinction between missing uh a bond payment and missing payment to other ones and that really seems to be the central point of the the current debate here and what the current debate really is sidestepping the elephant in the room that is the unsustainable fiscal path for the federal government CBO projects the debt held by the public will reach 185 percent of GDP by 2052. under current law Social Security trust funds are expected to be exhausted by 2033 and at that time the program would only pay 77 cents on the dollar of the scheduled benefits so really the debt limit that we should be concerned about is not the one that Congress imposes on itself but the one that market said on Congress when they're no longer willing to buy treasury debt so all of this the question about whether we're going to miss payments is really just about the timing we need to figure out a way to have a discussion about about how to fix the budget in order to bring debt back down to a sustainable level and polls show that the public recognizes the problem with the government's fiscal situation uh in in a narrowly divided Congress the debt limit acts as as a forcing function to provide external pressure or a deadline and this just seems to be the case that that needs to happen in order to get a narrowly divided Congress to make hard choices as you all know we've just recently been living through another round of acrimony related to the debt ceiling a default would have catastrophic impacts in every single part of this country whether you're in a red state or in a blue state it doesn't matter every single part of the country we're talking about millions of jobs lost devastated retirement counts and a recession we've also heard some House Republicans refer to preventing default as the only concession they are willing to make but preventing a catastrophic default is not a concession it's their job that was the voice of Corrine Jean-Pierre President Biden spokesperson speaking on this latest round of debt ceiling talks that we've seen the spring 2023 version of this story and we also heard opening remarks from Mark Sandy and Parker Shepard and now we're going to move into our general discussion but Mark I had to cut you off and um the what what I was going to ask you coming out of uh Kareem jean-pierre's statement about the consequences and the stakes you were you were listing some of the stakes of debt ceiling breaches you were calling calling and so let's let's resume with where you were there if you can take one or two more minutes with that and then let Parker respond to some of what you're saying uh yeah in a breach where the treasury can't come up with the cash to pay everyone on time uh it's got some hard decisions to make actually he's probably the president United States he's got to make the decision uh do they pay who do they pay and who gets money first I mean uh the treasury has the ability to pay bondholders ahead of everyone else because the those payments are done in a system called fedwire which is independent of the payment system used to pay other bills uh my guess is that the president would decide to pay the bondholders first uh just because if he didn't there would be the treasury debt would get downgraded in the uh debt of all the institutions that are backstopped by the federal government would also get downgraded it would be instant chaos uh stock prices falling interest rates Rising uh we'd go into recession very very rapidly within a few days and it would be a very dark scenario so my my sense is he'd probably decide to pay the bondholder and then pay everyone else late and the way he would do that the way the treasury would do that is it would wait uh until they raised enough cash to pay everyone on a given day then they go on and raise enough cash to pay everyone on the next day and so forth and so on and then the longer the breach goes on the longer and longer people are gonna have to wait to get paid and that you know that means Social Security recipients that means the military that means it could mean the electric bill for the office building the federal office building and Omaha Nebraska uh that's not a great scenario either either uh interest rates would still rise stock prices would still decline to take a little bit more time because investors who buy the bonds would ask themselves well how long is it politically viable that I'm going to get paid ahead of the 83 year old grandma who uh required Social Security assistance particularly if I'm a Chinese Bond investor or I'm a you know Japanese or Saudi Bond investor so chaos and Susan either way one other thing and then I'll stop the president's going to get sued immediately right because who who who made whose decision is it his decision decide who gets paid first and who gets paid last that's it that's a very open legal question that will ultimately have to be decided by the Supreme Court so in that legal uh uncertainty again just adds to the chaos so it would be a complete mess Parker Mark said in his opening that the very existence of the debt ceiling has led to this counterproductive drama uh that we've we've been coming through in Spring of 2023. so I want to ask you are you defending the debt ceiling mechanism in itself as it is do you think it's a good thing do you serve do you think it serves any useful purpose so the purpose is that every time we come close to the debt ceiling it is an opportunity for Congress to incorporate new information about the state of the economy adjust plans for spending and revise them to try to keep keep debt going back to a sustainable path even just going back from a few years ago you can look at CBO estimates for the path of interest rates for the path of debt and find that they are continually being revised up the the Federal Reserve has increased interest rates faster than most people in the economy thought possible they were even giving guidance forward guidance that they were intending on keeping keeping rates low chairman Jerome Powell took three quarters of a point rate increases off the table and then all throughout last year the the fomc ran off a string of increases that was what led to some of the banking problems earlier in this year when the value of their assets fell unexpectedly what would be the negative consequences of the debt ceiling being abolished by Congress you lose this this forcing function to come back and what do you mean by forcing function the way Congress operates today they don't ever pass anything until the last minute I I too Tire of the the brinksmanship where everything gets pushed up to the last minute even outside of the debt ceiling you can look at it in the regular appropriation cycle with continuing resolutions where Congress is continually losing the ability to to make compromises and pass sustainable things with majority it's just a living day-to-day continually kicking the can down the road and and that's where we are like if we don't ever make any sustainable changes you can look at the long-term path for debt and you can see it exploding we're heading for a debt crisis so if not now when I would I guess we don't want the um the immediate short-term problem is is something that I think both parties in Congress are trying to avoid no one wants to default but the question is about what are the reforms going to be to put in place to get spending on a sustainable path I think what I understand you're saying is that when you use the word forcing you mean it makes everybody stopping make some hard decisions is that uh do I have correctly what your your argument is all right I want to take that to Mark uh Mark the again I think I I almost regret using the gun to the Head metaphor so I I'll try to think of something else but let's just talk about hard deadline that makes everybody make a decision because the decision has to be made to avert catastrophe and I think I hear Parker saying that's a function that's positive and might even be one that Washington needs because otherwise it would there would be can kicking forever yeah I don't think it works uh it the history shows us it doesn't I mean look at where we are with our fiscal situation today and of course I don't know what the counterfactual would have been maybe debt levels would be higher I'm not sure I doubt it but I don't think uh the debt limit drama and the result of the that those negotiations land us in a better place in fact could land us in a much worse place because it just creates acrimony and hard feelings and bad blood and you know these lawmakers we need to come together are now driven apart so I just don't think it results in any meaningful Improvement and again you can see it in the current context I mean here we are the negotiations are going to land on some cuts to non-defense non-va discretionary spending but that's not the problem and I you know I agree with Parker we got long-term fiscal problems we've got big problems we've got to address there's Social Security their Medicare their Medicaid these are things that are very complex and you're not going to be able to address and solve those things in The Cauldron of the heightened political debate around around the debt uh debt ceiling drama so I I'm totally on board we got to address these problems we're not on a sustainable fiscal path but the debt limit is not helping and by the way you know when you hurt the economy you hurt our fiscal situation and you make the ability for us to address our long-term problems even more significant it and if we actually do breach and again the odds of that are rising just given the political discordance that's patently evident everywhere every time we go down this path it's getting worse and worse and worse it's not hard to do a forecast and say hey two four years ago from now we're going to breach and then think about the economic damage and what that means for our long-term fiscal situation so it's it's just in just counterproductive it doesn't work I want to take one last pass uh Parker at this issue of whether the debt ceiling really serves the positive function that you're saying that it does of forcing people to do something finally and Mark fundamentally just says yeah he knows that that's what your your case for it is he just says it doesn't work it doesn't it doesn't serve that purpose I mean we're having a conversation right now aren't we uh you can go back to the last eight major spending changes and they were all tied to increases in the debt limit this is like Social Security is known as the third rail of politics because nobody wants to touch it and it's it's 10 years down the road where we're going to exhaust the trust fund and at least there needs to be some statutory change made to the program to enable it to continue paying scheduled benefits but um it would be great if we could start addressing that earlier we could make smaller changes that would be enacted with with less of this disruption again the same disruption that that Mark is worried about in the short term that would come from a a temporary default from the self-imposed at limit I think the bigger question is what happens down the road when the if the economy continues on its path and Congress continues on its path then what happens when we hit the actual debt limit imposed by markets and Congress it can issue debt and no one wants to buy it and then everybody who is expecting payments no longer has has uh payments coming in like this yeah it's a political question um but the the question is how do we get a Congress that is divided to come together to actually have a discussion and at least you know the debt limit may not be perfect but it's it's serving its purpose we're having the discussion right now I want to ask you each if the stakes in this are so high as has been described and I don't think either of you dispute that they are why does Washington even play this game and Mark why don't you take that first well you think about our political um environment I mean it's incredibly highly polarized uh and each side is uh using every cudgel they have at their disposal to hit the other other side and this is a pretty big cudgel uh you know pretty significant uh cudjoe and uh therefore you know they're using it but it goes to fundamentally are fractured uh politics uh we are a very discordant society and it's reflected in in the deadline the drama and in the Discord that it's it's creating what about you Parker I think a lot of it has to do with the media environment where you have used to be that you had thousands of newspapers across the country most people followed along with their local news and the national National debate was of less importance so the funding for the federal government was smaller but we've seen increasing centralization that's focused on governance at the federal level and attention that's focused on the the federal debate and that's kind of sucking the oxygen out of of governance at at lower levels it leads to a debate by by cable news hits as opposed to regular order that's going on in Congress where um you can get amendments and and make changes and find compromises and uh and unlikely coalitions that get formed through the process of regular order we've seen the breakdown from getting funding by local parties uh to bigger machines that have centralized a lot of the um the funding and political decision making behind leadership so you see the bills rather than getting through regular order and finding compromises and something that could be sustainable across Congress you see the leadership debating changes the bills behind closed doors they dump the the Thousand pages and give everybody 48 72 hours to read it and then we have a vote at the last minute so let's talk a little bit about just the history of this because as has come up in the conversation so far it's happened a bunch of times before we also believe quite strongly that we have to raise the debt ceiling there is no option to doing that and that that will happen because the economic impacts of not voting to raise the debt ceiling would be calamitous so that was Jay Carney in 2011 basically sounding the same signal that we've heard sounded by the White House through the spring of 2023 about the debt ceiling needing to be raised similar sort of argument and Parker again I I feel that it in in a way it goes to Mark's point that we keep going through this game of chicken over and over again but it also I I'm I suspect you would say yeah but it got everybody to focus back in 2011. it it led to it led to some decision making it led to some uh rethinking about government spending so would you say that the repetition of this kind of Kabuki tense around the debt ceiling limit continues to be a useful function for us socially and economically and financially I mean the the exact mechanism of how we're going through this is is not desirable but I don't know um what the the alternative is where if we if we get rid of the debt limit and just say we we permanently suspend it um where else would would we come back to having these these discussions nobody wants to touch where no one wants to make difficult decisions no one wants to be on the record making difficult decisions um Congress has has abdicated a lot of its ability influence in setting legislation recently they've they often fill bills with saying sections where the secretary shall determine and they let vast swaths of the executive branch actually fill in some of the details which allows them to focus on some of the high level stuff but avoid the messy work of actually doing the compromise so I think a lot it was really good to see within the the drama over determining the speaker earlier this year that that was one of the points of contention of reintroducing regular order back into the house so that amendments could be made and we could find a way to actually find a compromise it's that's a muscle of actually finding a good compromise that seems to have been lost in Washington Mark Parker's making the point that in the absence of the debt ceiling there would be virtually no functional control of the mounting of the debt and that it serves certainly serves that purpose and it was then that was the purpose for which it was initially instituted in addition to allowing for more flexible uh borrowing it was also to allow flexible borrowing with a safeguard that there would be a limit to it and without that limit the executive branch would have very little incentive to stop spending you know I think uh things do happen when a voters uh decide to put a party in control you can see that when President Trump was elected and had both the house and the Senate under Republican control stuff happened and when President Biden was elected with the Democrat control Democratic control of the senate in the house stuff happened and voters voted and showed their preferences and the policy was made so things do happen without the debt limit big things happen with really big things happen without the deadline and they've happened historically back in the early 90s they've happened without the debt limit to good effect here's here's the more narrow thing I'd say and that is I you know I If I Were King I'd take that debt limit and I'd say I don't I'm getting rid of that but what I'm going to do is say if this goes back to kind of the Pago rules if you Congress and administration should want to pass a piece of legislation that increases that increases spending or Cuts taxes you've got to pay for that and if you don't pay for that you got to pass a debt ceiling increase at that point and say you know uh you've got to finance the spending that you and tax cuts you've agreed to right now at the time of that decision and then get rid of the rid of the drama and you then and then you uh you make it a lot more uh much more efficient process and people really think about these things going forward one other thing I'll say I have faith in uh you know what's that old Winston Churchill quote I'm going to butcher it but he said Americans will try everything and then ultimately do the right thing and I believe that to be true we will try everything go down every single path and that's what we're doing on every single issue from climate to Social Security to Medicare to gun control to everything but ultimately we will find the right path forward because we always have and because our you know our system does work we just got to let it work we can't muck it up with things like the debt limit so I'd like to bring in some other voices some journalists who are specialists in in covering issues like this and bring them into the conversation and ask them to bring some questions with them as well so I want to start with Kate Aronoff from the new Republic Kate thanks so much for joining us on open to debate and we know you've been listening along and we'd like to get your take on this with a question to either of The Debaters sure thanks thank for some sort of bipartisan agreement over the last several years is some level of anxiety about the United States place in the world vis-a-vis China but also vis-a-vis other countries who aren't necessarily aligned with U.S policy on a number of fronts and there have been various sort of policy attempts to either resource Supply chains to build up key domestic industries that had gotten votes from Republicans and Democrats the chips act uh the inflation reduction act although that was more partisan and part of this anxiety in recent months has been this discussion about dedolarization and whether or not in the not too distant future the United States will stop having control of the global Reserve currency whether that will be remnib or something else but there's this really persistent anxiety about this and listening this conversation I think what you know seems important to mention it's just the that limit the debt ceiling is such a strange American phenomenon we're the only country on Earth that has one that actually matters Denmark has one that's too too high to really make a difference right and so why why would any other country on Earth not look to dedolarization as a real option if every couple of years Republicans and it is mostly Republicans who do this decide to engage in a hostage negotiation over whether the United States the most important economy on Earth is going to default on its debt which would put a sledgehammer to the global economy not just ours but would undermine U.S treasuries maybe the most important factor in the Global Financial system so Kate just to help the delay audience understand your term dedolarization is the notion that since World War II at least the dollar has been the the Global Currency and the one in which most international business is done and puts the US in a fantastic position and by D dollarization you're suggesting the world might say you know what they're so crazy with the way they're doing it over there let's move on to somebody else's currency which would have disadvantages yeah and maybe a simpler way to put it it's just why would we choose to endanger institution the U.S has that it's disability which is U.S treasuries Parker do you want to take that first yeah I can start with it I think that um so there was in 1979 there was like a technical glitch that actually resulted in a couple of bond payments being technically late and we still managed to to continue on with the dollar as the central world's Reserve currency with uh the treasury as the um as as The Rock Solid risk-free measure of interest rate and I think that we we want to really separate here the distinction about a short-term disruption and a long-term disruption and I think that's really the difference between markview and my view is that I mean yes it would be bad if we uh if we missed a payment briefly here but again when Mark keeps talking about the um the desire to avoid having the default and the continuing negotiations coming up against the deadline I think that there will be something that comes through even if it even if we brush up against the deadline and maybe are a touch late where the fundamental problem hasn't changed we're just off by a couple of days the bigger issue is what happens if we have a large five percent of GDP deficits for years and years decades into the future and then the only way to continue to finance those deficits is through printing up new money because uh that's what drives the rest of the world to decide that they no longer want to borrow treasuries China's already selling off its its treasury Holdings uh other countries are are already starting to lessen it but it's not necessarily because of debt brinksmanship uh on this in the short term how about you mark yes exactly uh it will diminish the geopolitical status of the United States of America this whole drama is people are looking at this from all over the world the only thing that's saving us Kate is where are you going to put your money you know I mean York has its own problems uh Japan UK Australia are too small and really Chinese won I mean you don't even have a you know close Capital account no property rights and you know so uh it's that's the only thing that's holding up the dollar as a reserve currency to any significant degree because there's just no good alternative but that that's not a winning strategy okay did you have a follow-up question I I would I would just ask I mean Parker you mentioned that this would be a temporary situation uh that you know we shouldn't worry maybe too much about what would happen if we breached that limit I mean the the United States credit rating getting degraded which is really on the table if that happens seems like a pretty long-term effect and I don't know if you know if if United States credibility really recovers and so I just wonder you know what you think happens right is there a long tail effect or you know it seems unlikely to me that we just you know snap right back and everyone looks at the US like they did before we defaulted so I think picture yourself as a lender and you have have two potential borrowers that you uh that you might want to lend to would you rather lend to the one that is paying attention to his finances and it has some fits and starts on on actually making payments on time but continues to revise his finances and make sure that everything's good or would you rather lend to somebody who blows through uh missed payments who isn't concerned about where the money is coming from but is is papering it over and borrowing it over and letting that uh a debt accrue with other bondholders of which you are one of many would you rather lend to someone who is trying to make an effort to revise his fiscal situation or somebody who is just completely letting it go on autopilot and not not paying attention I think the bigger problem is what happens for these other countries if they're evaluating the fiscal health of the United States not in the short term but in the long term thanks very much Kate for uh for your for your question I now want to go to Aidan Quigley who's with CQ roll call and he's the reporter for budget and Appropriations Aiden thanks so much for joining us at open to debate and coming in with your question yeah thanks for having me on so essentially the 14th Amendment says that the validity of the United States debt shall not be questioned what that means it has been debated between legal Scholars there's one train of legal thought that says that means the president can you know just continue to pay the president's debt even if it you know they exceed the debt limit set by Congress the other side argues that Congress has the power of the purse under the Constitution and it's blatantly unconstitutional for the president to just ignore a co-equal advance of government uh spending limit do you think that the president can uh you know continue order the treasury to continue to pay the bills even if that exceeds a debt limit and part two is uh do you think that this matter should be litigated whether or not the current Congress decides to raise the debt ceiling okay so can the president do an end run around using the 14th Amendment and that should that battle be fought so Mark why don't you take that one first well you know I'm not a constitutional lawyer uh uh I can play one though so and I've heard uh both sides from very smart constitutional lawyers and they both make strong arguments but I'm just a simple guy Economist and I think well how can it be constitutional for the United States of America not to pay its debts how can that be constitutional that doesn't make any sense to me so I would think at the end of the day the Supreme Court would have to rule it would rule in favor of the president if he invoked uh the 14th Amendment uh uh as a way to to end uh and continue end the debt limit drama and continue to issue debt now having said that that's going to be very costly because as soon as he invokes the 14th Amendment until the time the Supreme Court rules and who knows when that's going to be there's going to be complete chaos because Bond investors are going to say well there's some probabilities Supreme Court's going to say this is unconstitutional those bonds what are they are they full faith in credit I mean what it what are those bonds and they're not going to buy them and that means you've got to pay a much higher interest rate and it could be serious it could be busted Bond auctions if you have a busted Bond auction then you're in a situation where you can't potentially even you know pay you roll over the debt that's rolling over and pay pay you're going to lose money you're going to actually have a bigger problem on your hands and then of course who knows you know how the Supreme Court's going to rule it like I it's a very difficult to think so the only time I would use the 14th Amendment would be in break glass situation we've breached uh Things Are unraved battling rapidly uh interest rates are soaring stock prices are caving layoffs are mounting it is complete utter chaos and then this is then you then the question is which is the least bad course it's a Hobson's choice which is the least bad this complete chaos and observing or the 14th Amendment I'd go 14th Amendment but you know that's a pretty tough decision to make because it's not going to be painless it's going to be very painful Parker what is your take on the 14th Amendment and run possibility uh I am also not a constitutional lawyer uh so this is is somewhat outside my wheelhouse I agree with Mark that there would be lots of chaos uh particularly if this gets if this gets pointed and tied up in the courts for a long time and financial markets need to continue to function but from my understand my simple understanding of the actual text I believe article one section 8 gives Congress the authority to borrow against the credit of the United States and the text in the 14th Amendment just says that the the debts shall not be questioned so um yeah again if the question is should the government continue to repay its debts that have already been incurred well yes I don't think anyone is arguing otherwise the question is is what about anticipated obligations for which there has been no borrowing against the credit of the United States um that would that be valid can the president give these create new authorizations to borrow against the credit of the United States and that con that power is is clearly given to Congress it again I'll let the lawyers actually fight it out in the courts but I I don't think that the 14th Amendment covers debt that hasn't yet to be issued Aiden do you have a follow-up question I I do it's actually tied back to something from Parker's opening statement uh which was essentially that the real debt limit is when markets no longer buy treasury debt uh and you know we need to get on a sustainable path my question is what would be a sustainable level of debt anything where the uh the ratio of debt to GDP is is stable and what exactly that ratio is is a political question uh I think debt held by the public has typically been in in the 35 to 40 percent of GDP average after World War II so returning back to something like that before where um where the the debt ratio was before the 2008 financial crisis I think that would be a good goal the the things to consider there in the trade-off um are just a you a lower level of debt has a lower level of interest but you also have to run bigger surpluses for longer you have to make the the trade-offs about how to adjust the budget in the presence in order to continue to drive the the debt down to lower levels all right um thank you I want to thank Aiden and Kate for bringing a different lens to the conversation and um we are going to head for the home stretch and our home stretcher or closing statements by each of our Debaters in turn uh Parker Shepard since Mark went first for our opening statements you have the floor now going first once again on the question should Congress abolish the debt ceiling you are saying no and one last time to explain why so there's a famous quote from Ernest Hemingway's when he was asked how he went bankrupt he said gradually then suddenly and that's how the default crisis in the United States is going to play out as well if we get to a real debt crisis one that's not necessarily coming from a self-imposed limit by Congress but one that's coming from markets that will happen very quickly if there are current estimates right now from the IMF of the amount of fiscal space that the federal government has effectively how much that debt to GDP ratio can continue to climb uh until we reach a point where markets no longer want to buy treasury debt and their estimates put it in a range of about 160 to 185 percent so internationally there are there are other countries that are still looking at buying lots of treasury debt this came up in the questions it's a very real concern that what happens if other countries want to move away from the dollar and that's a a good portion of a significant portion of current demand for treasury debt if that were to disappear that would drive up interest rates that would we need forced Congress to find a way to fill the Gap and the way they're going to do that is through printing money if they can't make the changes to the budget to figure out how to fix the deficit we're going to see runaway inflation where the Federal Reserve is effectively buying up all this new debt with brand new money it would be just like what we saw after the the pandemic but forever so we need to keep the debt limit because it's an effective mechanism for Congress to come back and make these difficult fiscal choices to avoid that worst case scenario thanks very much Parker Shepard you have the final say here Mark tell us again why you are answering yes to the question whether or not Congress should abolish the debt ceiling you are saying yes I am uh totally on board with the concern that our nation's long-term fiscal path is unsustainable we need to change uh policy both tax policy and spending policy we need spending restraint and we need additional tax revenue to make sure that the nation's fiscal situation does not continue to erode it's not you know a cliff event it's not that we're going to hit a wall here next year even the year after but you know anyone who's doing some prudent budgeting and forecasting comes to the same conclusion that we need to do something about this uh I don't think the debt limit is the way to do it and it's not working and it is actually counterproductive it's leading to uh increased economic cost it's raising the odds that we will breach the debt limit and if we do breach the debt limit the cost of doing that are incapable and will make it even more elusive for us to achieve the goal we're all striving for and that's fiscal sustainability the debt limit also is diminishing our status in the rest of the world at a time when our geopolitical position is already under significant pressure from a big big forces overseas we have to work to shower up confidence in the United States of America and that's certainly not what's happening in the context of the drama that we're the political theater and drama and performative nature of what's going on here it's not uh not helpful uh there are ways to address this these are things that we need to discuss as a nation but the debt limit is not I should not be part of our future budget or our efforts to address our long-term fiscal situation thank you very much Mark and that concludes our debate and I want to thank our Debaters Mark and Parker thanks so much for posting this with an open mind and for bringing your thoughtful disagreement to the table and short for being open to debate and I want to thank our reporters Kate and Aiden as well for your contributions and taking things in a different direction and everyone listening I want to thank you for tuning in to this episode of open to debate as a non-profit our work to combat extreme polarization through civil and respectful debate and argument is generously funded by listeners Like You by the rosencrowns foundation and by supporters of open to debate open to debate is also made possible by a generous ground from the Laura and Gary Lauder Venture philanthropy fund Robert Rosencrantz is our chairman Claire Connor is CEO Leah mathow is our chief content officer Julia melfi is our senior producer Marlette Sandoval is our editorial producer Gabriella Mayer is our editorial and research manager Gabrielle yanicelli is our social media and digital platform forms coordinator Andrew Lipson head of production Max Fulton our production coordinator Damon Whittemore our engineer Raven Baker is events and operations manager Rachel Kemp is our chief of staff our theme music is by Alex Clement and I'm your host John donvan we'll see you next time [Music] foreign foreign

Channel: Open to Debate

Views: 863

Keywords: Intelligence Squared, IQ2, IQ2US, Intelligence Squared U.S., debate, live debate, I2, nyc, politics, conservative, liberal

Id: w9Kxvs1IyKY

Length: 49min 28sec (2968 seconds)

Published: Fri Jun 02 2023

Reddit Comments

[u/VanDammes4headCyst]

Yes. Next.