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MVAR Managing Partner Steve Murphy and National Review Senior Editor Ramesh Ponnuru on how reaching the fiscal cliff could impact the U.S. economy and...
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I love it.
All right so what happened to America's credit rating it's due to fiscal -- you'll call -- debt ceiling debacle.
Resulted in Standard and -- stripping the US of its top rating.
And now Fitch is warning of a possible review.
Joining sad that this possible ramifications senior editor with review -- communion.
And former campaign manager for Dick -- presidential campaign Steve Murphy gentlemen.
Welcome to both promise I'll begin with you you know one of the topics sort of lost in the shuffle this that this -- -- negotiations is that -- mostly close to running up against the debt ceiling.
Yet again.
What do you think should happen with the debt ceiling and are are you really all that worried about another debt downgrade since the first one didn't seem to do all that extra oil market.
Well I do think it's important to that the debt limit to get raised.
But at the same time.
I think it would be advisable to -- we're doing that look at the drivers of our exploding debt and do something to reform that.
I don't think that the credit rating should be the focus of debt ceiling talks.
Because it just as you pointed out.
You know the credit rating is just the opinion of the credit -- ended didn't seem to have all that -- an impact if you look at the stock market -- interest rates her employment.
-- downgrading of the credit rating doesn't seem to have had any effect.
But Steve we have the debt ceiling for -- purpose right to avoid overspending get it doesn't seem to be doing its job.
How we get meaningful spending cuts preserve the entitlements back into the dialogue of this fiscal -- debacle.
Well I don't think that we have it.
To encourage fiscal responsibility.
So much as we have it because it's required for congress to authorize.
Borrowing money to pay our debt and deficit obligations it's -- it the way I look at it it's a mere constitutional.
Technicality.
And we and we should raise it I'd like to make one point about on the downgrade.
Issue grow much -- talked about.
If we go over the fiscal -- back.
I would certainly be no reason for a downgrade because we would be cutting the deficit.
And that that right with plenty of and we kick the can down the road here and don't do we need saying -- short term solution.
Then I think it would be reasonable for the -- Debt excuse me for further downgrade us to be downgraded yes right you're right -- says ironically senate back over -- because you know there is.
Line of thinking that if we do stuff for a second credit downgrade.
That it could actually.
Have more for ratification in just one downgrade because you do have -- canceled credit agencies right.
And if your credit tour the United States are looking at the credit rating and -- you have not just one but two -- of the majority of more negative.
Credit ratings vs a pristine.
Credit rating across the board that actually might roil the markets.
Obviously you've had here in the background about keeping rates -- as well the royal reserve but I need a second downgrading and that's really got to raise some eyebrows for the market participants -- particular.
You know I I think that people have gotten more sophisticated about the opinions of the credit rating agencies.
Over the last few years what -- have failed to see and and how much their opinions are word and I think you've you've you've got it right in Europe question in that.
-- you you've got a look at the international context and where else are people gonna make.
Investments.
Where their moneys more secure in -- and hello it's not looking like there are a lot of places.
-- -- that is the case is Steve I -- kind of shift the conversation a little bit here and you know we talk about spending and what matters most the entitlements Social Security Medicare.
What's the right balance what's the proper safety net how do you want to see this all unfolds here because we do have to reserve government spending for these things.
Bail -- so -- it doesn't belong in the conversation because Social Security is solvent.
It's actually been loaning money to the federal government that the federal government owes back to Social Security just like it -- all the rest of our creditors so -- Social Security out.
Medicaid is mostly for children though we have a problem with senior citizens in long term nursing home care that's financed through but Medicaid.
That needs to be addressed but the big problem is Medicare.
We have do have to do something about rising Medicare -- now Republicans talk about completely privatizing it.
Democrats talk about doing nothing neither one of those is a viable option they've got to get together and come up with some ways to slow the growth in Medicare spending.
-- -- don't have a lot of -- of wanna get to wag your your last comment on how ECB alternate endings of the fiscal cliff.
Well I think we're gonna go over the cliff I think that taxes are gonna rise and spending is gonna start automatically getting cut at the beginning in January and then.
Give depending on the public reaction you might get a deal but I am pretty pessimistic have been all month about.
Whether a -- to be made before the end of the year.
Promised -- -- and Steve Murphy thank you both for timing -- that you take unease.
Topics of the day -- correct.
