You're watching...
Fmr. Reagan Budget Director David Stockman argues the August 2nd deadline for the debt ceiling is artificial.
Also in this playlist...
Auto-advance: ON
Auto-advance
This transcript is automatically generated
This and it's July 4 break is being canceled fireworks are likely in between lawmakers will struggle to reach a deal to raise the government's borrowing limit.
Before that August 2 deadline yes dead line.
Are you get if you cross that line will despite all the warnings about what would happen without a compromise by then.
Former Reagan budget director David Stockman has said in the past this deadline isn't real.
Back gives an outlook like outright lie that we brought him back because we're getting closer and closer to August 2.
And now things are heating up and there are war worries and concerns that we may lose our credit rating.
What's been the story forward have you changed your opinion at all or do you still feel that week -- what this deadline passed and the US would be fine.
Now the curve first of all of the crisis is that we're broke as a country after thirty year deficit SP as street we're out of balance sheet.
Fourteen trillion of debt.
And we're borrowing 43 cents of every dollar we're spending so we have to have.
And major deficit reduction plan now.
Before they raise the debt ceiling a dime and that will require tax increases which and Republicans are against.
And entitlement reforms which the Democrats oppose but there's no way out now -- to August 2.
That's entirely artificial.
That is just propaganda from the treasury its Tim Geithner again that's your facts -- -- as the facts are that we have 200 billion dollars a month of revenue flow right now.
The run rate of interest payments on our national debt is twenty billion.
Tim Geithner could take the first three days of revenue in August put it this cigar box and we would be covered for the rest of the month.
The run rate of Social Security is sixty billion a month.
He could put eight days and another hat box and Social Security would be protected the rest of that there is no law that says the trade -- can't.
Allocate prioritize.
And if we're gonna delay some payments to -- military industrial complex contractors.
Or some health insurance companies on Medicare fine.
Because we can't keep kicking the can.
And pretending that we raise the debt ceiling and we'll get to it tomorrow.
We're gonna end up where Greece is if we don't stop this process which is really getting bad.
-- but we're notorious for kicking the can down the road so you can't.
Denied that August 2 debt ceiling deadline does provide -- good negotiator because these negotiations have totally stalled out.
Yet they have and that's unfortunate but we're so close to it now they're gonna say we haven't agreed to enough of a plan we haven't laid out on the details we haven't vetted it.
We haven't debated so let's just raise the debt ceiling he get back to it I say no because the this second deadline isn't real.
They can buy themselves weeks or months now what it will do is spook the bond market.
And we need that.
We need the bond market actually goes south interest rates to go up the bond to sell off so we get a catalyst to wake up these politicians that.
The credit card is finished when the I think what.
I guess I -- -- -- think humor with President Reagan back when he cut all kinds of deductions but he raised certain tax -- lowered certain tax rates but cut out the deductions.
And you figured out ways to find wiggle room.
But it seems intransigent at the moment is that the Republicans won't raise taxes which you say is what's needed.
And the Democrats won't cut entitlements that to me seems like a massive in -- how to get through.
So that's why we're effectively in default right now if that impasse remains.
Anyone that can do the math 44% of GDP spending 15% in revenue can see.
That we're heading for the wall and -- both sides give.
Now the Republicans there's this especially at fault because for thirty years they've jawed about spending cuts that have never done it.
Now the wolf is at the door and we have to pay our bills.
During the Reagan -- we raise taxes after the first big cut.
We raise taxes eleven times the equivalent of what would be 400 billion today and guess what the economy grew nicely.
And 8384.
And 85 after taxes were raised.
Not because it's a good idea but because at that point we had no choice and we had to pay our bills somehow and ideology is developed.
That if you I don't like what's been spent in government you don't have to pay your bills that's not true if you can't cut it you've gotta fund.
All right but if you're depending on the markets to signal lawmakers to get going -- come to an agreement on deficit reduction that hasn't happened yet -- we have seen yields come up slightly this week.
Largely because of Greece being resolved at least for now and the end of Q -- to.
But there is still -- little room.
Well I'll tell you what there's nineteen Wall Street dealers sitting on hundreds of billions of inventory bonds.
With 988 to one leverage.
Just let a few weeks pass where -- in the middle of this.
You know -- fight.
Without raising the debt ceiling and you will see bonds sell off interest rates go up and frankly this is the bad thing the Fed is done.
We've got rid of -- -- today finally and that.
Was a artificial.
You know downward pressure on interest rates so the politicians that there -- say look we -- to your money at thirty basis points why should we worry about.
The debt forecast a problem -- half was here yesterday and he said several times that.
That the Democrats for spending way too much money and then he also said there is no way he would put in any kind of tax increase now you as a Republican are saying.
But that is actually needed to be part of the of Malcolm.
We extend the bush tax cuts is that's something we should have done I mean that was the Republicans pushed very hard for that and the president agreed with the -- Yeah -- that was a huge mistake as it opened up another 4500 billion of deficit this year that we're now trying to borrow when we're up against the limit.
Yesterday the present unbelievably.
And I don't care about taxing millionaires or billionaires they should pay that's okay.
That unbelievably he said let's extend.
The temporary reduction in the -- security tax a hundred billion a year next year.
To help the economy they do this over and over he's talking about.
The dire crisis of the debt ceiling and yet he comes in and says let's make a deficit bigger tomorrow.
And then get around to the problem -- for six years down the road.
I think that is a failed strategy and we're just rolling the dice waiting for something bad.
-- David Stockman we're glad you're here with us playing cards out thank you so much industry David Stockman former Reagan budget director.
Now let's go over to.
