move in that direction. >> host: gentlemen, thank you for being on "the communicators" to talk about the impact of net neutrality. >> guest: thank you. >> c-span, created by america's cable companies in 1979, brought to you as a public service by your television provider. >> coming up next, oral argument from the d.c. circuit court of appeals on the constitutionality of the senate's 60-vote filibuster rule. then live coverage with treasury secretary jack lew on the need for congress to raise the debt ceiling. and later, more live coverage from the center for the national interest on u.s./russia relations and how the sochi winter olympics have spotlighted issues, including russia's counterterrorism cooperation and human rights practices. and at 2:00 eastern, or the senate returns for debate and a procedural vote on the farm bill.

last month a three-judge panel on the d.c. circuit court of appeals heard oral argument on the constitutionality of the senate's 60-vote filibuster rule. the case is common cause v. joseph biden. it seeks to have the 60-vote threshold needed to overcome the filibuster thrown out and replaced with a simple majority rule. the lower district court had dismissed the case saying common cause lacked standing to sue. the oral argument runs about half an hour. >> good morning. >> may it please the court, i'm emmet bondurant, and with me is steve spaulding who is staff counsel with common cause. the district court in this case and ruling on the standing issue here in three very fundamental respects that prejudice the court's entire view of the issue of standing.

first, the district court did not presume that the plaintiffs are entitled to prevail on the merits of their constitutional claims. he ruled precisely the opposite, citing that that is the rule, he ruled that he was not convinced that the plaintiffs had any procedural rights on the constitution to majority consideration of bills in the house. >> let's do that, your constitutional theory, the plaintiffs did have a right, a procedural right. now, as far as i can see, our cases that say that strict causation and regress about need not be established with respect to a procedural right which all stem from the footnote in louhan

talk only about procedures that have been designed to protect the interests of the plaintiff that is affected. so what exactly is your theory as to what the constitution, what concept -- this is a portion of the constitution that's not literally stated -- what is it designed to achieve? >> your honor, i believe, first, that the question of whether the provisions in the presentment clause were designed to protect the interests of house members, on the one hand, who pass legislation and send it to the senate or beneficiaries of legislation is itself a merits issue. secondly, if you look -- >> that seems to do something very strange with our cases about the extent to which we give the of plaintiffs a pass on

causation when it's a procedural claim. >> to the contrary, i think the supreme court has ruled precisely on that. let me give you several examples. munoz flores is a case in which the origination clause was allegedly violated. the government's argument in that case was it is irrelevant, the effect this has on individuals, was the purpose of that clause was merely to protect one house from invasion by the other of its exclusive turf to originate legislation. revenue-raising legislation. the supreme court said quite to the contrary, the government's claim that compliance with the origination clause is irrelevant in insuring individual rights is an error. the court has specific, has repeatedly emphasized the constitution refuses power better to secure liberty. in recognizing this, the court

has repeatedly adjudicated separation of powers claims by people acting in their individual capacities. and then specifically -- >> this is not a separation of powers case, is it? >> it is a separation of power between one house -- >> [inaudible] >> let me ask you, why isn't this case -- [inaudible] with respect to at least the non-house members? these two statute or bills were in the 111th congress when the democrats controlled the house. nancy pelosi was the speaker. we're now in the 113th congress. we have a different composition of the house and a different party of power. so why hasn't the case moved with respect to that? >> if you argue that you're essentially saying that this is not injury that is capable of repetition, but evading review,

the cases in election cases especially, and this is just another election case in many respects, because the shortness of terms of congress -- >> it has to be the same. are you suggesting that the dream act and the disclose act will come up again, be passed by the house in the 113th congress? how the heck does anybody know that? >> i am suggesting that they have a right to majority consideration without the obstacle of an unconstitutional procedure in the senate. they have, in fact, been reintroduced in success accessive congresses -- successive congresses, and can they will be reintroduced. >> [inaudible] >> they have not been passed by the house yet. if introduced in the senate, they may face exactly the same obstacle which is exactly the same issue, what has the court said about procedural rights cases, number one that the

standards on redress about are relaxed, number two, a plaintiff does not have to show a certainty that if the procedural obstacle is e are moved, that e -- is removed, that he would seek the benefit that he seeks. that is your ruling in wild earth only a month ago, that is the ruling of court in the city of pena -- >> you're talking about -- [inaudible] >> excuse me? >> you're talking about environmental impact statement cases? >> in that case it was true, but in ciada and clinton v. city of new york, those were statutory cases under the -- >> let me ask this question, you're sufficient that the house members vote in favor of the particular statute, the dream act and disclose act, is null because of the 60-vote cloture -- [inaudible] right? >> that is correct. >> well, you know, the house -- or the senate majority leader

under the rules and by custom can refuse to even bring up a statute for a vote in the senate. so does that make the majority leader in the senate unconstitutional was he's nullified a statute passed by the house? that has happened with some degree of frequency in the last several years. >> if the majority of the senate had -- [inaudible] to bring something up over the objection of the majority leader, then you might well be right. that, essentially, was scation v. carl. but -- >> so the majority leader every time he refuses to bring up a bill as passed by the house is acting unconstitutionally, is that your submission in. >> we do not have to reach that question. >> no, no, i'm asking you if that is what follows from your argument on the melters. >> that is not a rule of the senate as rule 22 is.

rule 32 is a rule of -- rule 22 is a rule of the -- >> but if your remedy against rule 22 is available, why don't you have an equivalent remedy against the majority leader? what difference does rule versus particular order make in this context? >> if the rule were declared invalid, then closure on any motion would be by majority vote under the general principle of all parliamentary bodies that goes back to -- [inaudible] that would also mean that other hearts -- >> actually, there is a rule. it's rule 19 of the senate that's been interpreted to give the majority complete control over what bills get voted on in the senate that pass the house. >> only about two months ago in a manner in which i would suggest as i did in my response to the senate's submission that

raises itself very serious constitutional issues and that the supreme court has ruled in no less than three cases. that the houses of congress are bound to follow their own rules. and that when, as justice brandeis held in smith, the interpretation of a rule including rule 19 adversely affects persons outside the senate, the question is not a political question, it is a question of law, therefore, not a political question -- >> the senate does affect outside the senate. >> be that's correct. and that is precisely what happened here. the exercise of rule 22 affected the house members. it nullified their votes. and the fact the vote was not nullified in the house, was nullified in the senate, it was nullification nevertheless. just as the vote of senator kennedy was nullified by the president's untimely pocket veto was nullified. just as the nebraska house

members' votes were nullified. not -- they were counted in the senatement of they were null -- in the senate. they were nullified when the lieutenant governor cast a deciding vote that had the effect of nullifying them. and the supreme court has said clearly in ruling in rains stands for the proposition that when a legislator's vote that would have been sufficient to pass or defeat legislation is nullified, that legislator has an interest in preserving the effectiveness of his vote that is sufficient to give him standing. >> one of the puzzles for me in your case is that can sue the vice president and several other individuals, none of whom are senators, none of whom engage in

voting for cloture, and the vice president vote for cloture? >> he cannot vote for cloture. >> so none of those individuals that you've sued are in any way, shape or form responsible for the harm you're alleging. >> that was precisely true in powell v. mccormack. the sergeant at arms -- >> the sergeant at arms barred him from coming in. >> the sergeant of at arms is a person who potentially was in a decision he had no role in making. >> makes me wonder why you didn't name any senators, and i think the obvious answer is the -- [inaudible] >> of course. >> but that also applies to officers of the senate under the supreme court's decision in -- [inaudible] so why shouldn't these individuals that you've named also be entitled to protection? by not naming the senator, you

don't get around the -- [inaudible] >> to the contrary. number one, the speech and debate clause does not apply to the vice president. he is the presiding officer of the -- >> he doesn't have a vote anyway. he can't give you -- >> he does have the power to rule on points of order, and if a rule in the senate is unconstitutional, he could end that exercise of that power, so declare it and enforce it. he is a proper party. number two, in powell against mccormack, the precise argument was made, that is that the speech and debate clause protected function theirs of the house who were acting under orders, who did not make the decision not to seek power. and the supreme court's answer is when an individual who works for the house, under direction of the house is carrying out an unconstitutional order, he is not immune from suit. and that is -- >> immunity when he's acting legally, is that the idea?

>> that's -- >> i think powell's within overtaken by a series of -- been overtaken by a series of cases, not the least of which is eastland -- [inaudible] other cases. let he back up a minute. you said that the vice president doesn't get seep or debate -- speech or debate clause protection? when the vice president's presiding over the senate, he hats speech and debate clause protection, doesn't he? where do you get that from? >> the vice president is not a member of the senate. the vice president -- >> there any cases saying that? i don't think so. >> there is no case that held, that has ever held that a person who is not a member of the senate, not an employee of the senate, not a delegate carrying out delegated powers of the senate is protected by speech and debates clause. in fact, judge williams, you wrote a decision in which you talk about the speech and debate clause.

it did not protect senate employees, for example, from discrimination cases when improperly firing a staff member who was not carrying out functions. >> but that goes to what's the legislative function. >> this is not the legislative function as far as the speech and debate clause. you have a far greater -- >> isn't it right at the heart of the legislative function? >> excuse me? >> isn't it right at the heart of the legislative function? >> the question is, well, not is it a constitutional exercise of legislative function -- >> that's the merits argument. >> that is correct. >> doesn't that count on speech ask debate? >> if you assume we are correct on the merits that the senate has violated the presentment clause by imposing a de facto 60-vote requirement to pass legislation, then you have to come -- then if you buy the speech and debate clause argument, you essentially say the senate is the only body in

the united states that can with impunity violate the constitution, and there's nothing the courts can do about it because you're immune. there is no such case. >> [inaudible] violate the constitution sometimes without, without suffering liability as with sovereign immunity. >> sovereign immunity does not protect the executive branch from violating the constitution. southern immunity or separation of powers did not protect the legislative and executive branches from jointly passing legislation that they thought was constitutional that turned out not to be. sovereign immunity did not prevent a person who was affected by the origination clause -- [inaudible] from challenging a bill that originated and was framed in the senate when it should have originated in the house. it ultimately lost on the merits

pause the court held that was not a revenue bill, it was something else. .. >> this gets into the substance but i'm just wondering, was the senate in violation of the constitution into the period from its creation in 1917, which created the first period of

can't debate at all? >> let me correct you actually. the first rules of the senate had to do from english parliamentary practice which allowed the majority and debate by simple majority vote. from the period 1916--- excuse me, 1806 when the rule was eliminated, the 1834-1840, there were no filibusters in the senate and the senate cut off debate by majority vote. it was only when somebody discovered that they had eliminated the only procedural mechanism that allowed the senate to cut off majority vote that the filibuster began. the 1970 rule was intended to provide a mechanism when none existed before. but the question is still, can you have a de facto rule that

legislation cannot pass in the senate over the objections of the minority without getting 60 votes? and i would respectfully suggest that clinton versus city of new york clearly answered that question. it provides a single, carefully considered, carefully crafted a method for passing legislation, and that is by majority from both houses, and that even in that case where the house, the senate and the president had an agreement to give the president up our two line item veto, because the house and senate recognize that they could not restrain their own in appropriating funds far beyond the budget, the court steps in and says, even though that may be convenient, even though it may make perfect political sense, it violates clause and

enforcement as -- individuals were not beneficiaries other than indirect sense of the statute that were involved. that is, the individuals involved did not have any enforceable legal rights under the two line items that were vetoed. >> mr. coble there'll -- may please the court, thomas caballero. i just want to quickly start with speech and debate clause and make a few clarifying point. the first is it is certainly -- the vice president is covered when he is presiding over the senate. in addition as -- [inaudible] >> because the vice president in presiding over the senate conducting legislative duty, the

supreme court held in another context the county commission i believe that when executive officers to legislative duty are protected by executive privilege. i would also like to point out the court correctly noted that a case held and sent officers employers are covered by speech and debate clause when acting in the legislative steer. they talked about the case and explain why speech and debate clause did not apply was because the person failing today representative powell was failing to do a knowledge sort of act, pay somebody. that wouldn't be covered by speech and debate clause but when the officer asked within the legislative steer and the court also noted is nothing more legislative and debate on the floor of the house and senate, they would be covered. [inaudible] who were the other individuals? >> the secretary of the senate,

the sergeant at arms of the senate and the senate parliamentarian. they make no allegations against these people whatsoever. they sue them because of their theory, incorrect, the devoted speech and debate clause barred by suing them. but again that theory is incorrect and they don't prevent -- present any allegation as to what these people do to cause their injury. in fact, the vice president wasn't even presiding over the senate that the cloture bill came on -- >> i would like to quickly turn to the addressability point. as the score two line item at it a senate rule, strike at the 60-vote requirement for cloture on legislative matters in rule 22. this court itself recognize that any such release would be -- as a 10 years ago in the judicial case which involved with the cloture rule. it said it would be interference

with the rule. so relief would be beyond the power of the corporate even if the court felt they could give that relief and said we will rewrite the cloture rule, that would have no effect whatsoever on the legislation failed to pass in 111th congress and they would have no effect on on requiring this and to take up any piece of legislation now. it's completed within the disk -- as the court recognize any legislation it considered the would have to be voted on in the house which is controlled by another party than it was. >> this is really an argument as to how much leeway they footnote and interpreted by the courts since then. i guess the plaintiffs on matters of redress ability, right? after all, the premise of that footnote is that the plaintiff certainly may not be assured that things will come out better

once procedure, he advocates is stalled spent i think the problem of whole concept of procedural injury in the case, as the court of that comes out of the admission contacts often environment the cases and their the court reverses the agency action or go to provide by its own procedure and sends it back to the agency where the agency re- undertakes the facts. here the court can't resent the matter back to the senate. those bills -- moreover, it can't require the senate to reconsider anything. i think that redressability problems demonstrate whitesell concept of procedural injury at its outset has no affability too much the context whatsoever. in addition to the point the districdistrictdistrict court me is no express procedure protection in article one, for individual plans with regard to particular pieces of

legislation. in addition to the regressive building, also the court below decided it was a political question and we would seek background on that as well. of the court have no further questions. >> i have one. has the dream act passed the senate? >> a very key piece of legislation was passed in the bill that passed in the last session. >> this border security -- >> correct. it's not identical to the bill that failed and, obviously, the house has to act on and the house hasn't taken up the legislation, that's correct. >> the majority leader of the house -- spent the majority leader, exactly, working with the speaker, majority leader sets the agenda in the house. >> i think the court -- >> thank you. you are out of time. why don't you take one minute. >> thank you, your honor.

first, the argument that this would be a rewrite of the senate rules is not well taken, and lets you are prepared to say to the supreme court, we wrote the affordable care act when they suffered -- [inaudible] severance and rewrite or two things. severance is allowed, in fact it's encouraged unless it is utterly clear that the legislative body would not have chosen a rule without the severance session. secondly, it is not true that the procedure rights do not exist in the legislative context. >> it's a case where the court said china -- suffered as a result of the statute that was not -- their simple is not a valid statute there at all. spring chada suffered as a result of procedural speech you can call of procedural and i

recognize the supreme court used the word procedure once in that opinion. basically found there was no valid statute, period. >> because there been a violation of procedural cause and that was the violation of chada's right. yellen against united states was a procedure rights case in which yellen refused to testify before the house un-american activities committee because they have not followed their own procedure in ruling on his request to be allowed to testify in executive session. the supreme court ruled that they had violated their own procedures, that he could not be punished in content, and that he had a procedural right under their rules to make a decision. and even though that decision was not likely to be in his favor, he nevertheless had standing. clinton is a procedure rights case. those people had no standing to

sue, no cause of action under the statutes or the appropriations that were line item veto. they were indirect beneficiaries, and it was the violation of the procedure right or and northeast florida contractors, to pick up your point, judge randolph, and northeast florida contractors, the supreme court held when moving the obstacle to white contractors being considered for the business they're been subject to minority, would not necessarily give them any business. there might not be any more contracts even left, just as the dream act may never be reintroduced in the house. but nevertheless, the court ruled that it could remedy it by removing the unconstitutional obstacle spend what do we do? do we order the vice president, the palmerton, the secretary of the senate to remove the central? central? >> whawhat you do is do what the supreme court has done in many cases, including affordable air

-- affordable care case. you suffer the 60-vote requirement -- [inaudible] the people that you should have no authority to do what you are requesting. >> if the court enters a declaratory judgment declaring the 60-vote supermajority provision unconstitutional and severe in it from the rules, the remainder of the road to remain in effect, senate by majority vote can do whatever it then decides is appropriate. >> you still have to have proper authority. if you're just declaring that, if it's used, will violate the zoning rules, you still ought to sue the owners. you don't sue the town manager who is not in charge of it. spent a declaratory judgment that the power was rendered against the sergeant of arms of

the senate would not make the decision, who had no power to do it. and the argument was made by the government, essentially the same argument that was made in the nixon tapes case. how would you ever enforce it if the house disregarded? footnote 87 the supreme court says, that is an inadmissible argument, to presume that one of the bodies in separation of powers would disregard a court ruling that their action is unconstitutional is an inadmissible argument. and that is the argument you're making and that is the argument which was rejected in powell and that is the argument that should be rejected. >> you need to wrap it up, mr. bondurant. you are way over your time. >> i was through. i thought judge randolph had another question. thank you very much. >> thank you. >> today, a senate banking subcommittee will hold a hearing

on the governments response to the recent data cicada breaches at target and neiman marcus. members will examine the impact on consumers and the steps being taken to protect our financial information by identity theft. witnesses include the secret service's lead agent for cyber investigations and the federal trade commission's consumer protection director. you can watch live coverage of the hearing beginning at 3:00 eastern on c-span3. >> i was in a car wreck. i wrote about extensively in my book. and the whole time i was in the hospital not injured really, i mean, i had a cut on my leg and a broken ankle, i was praying that the other person in the car would be okay. and the other person in the car was one of my best friends, which i did know, i didn't really recognize that at the site of the crash.

and i think because i prayed over and over and over for him to be okay and he wasn't come, i thought nobody listened, god was not listing. my prayer was a answered. so i want to really a very long time of not believing, not believing that prayers could be answered. and it took me a long time really and a lot of growing up to come back to faith. >> first lady laura bush tonight at nine eastern live on c-span and c-span3. also on c-span radio and c-span.org. watch a recent interview with mrs. bush at the george w. bush presidential center in dallas at 10:30 p.m. >> and we are live at the bipartisan policy center here in washington, d.c. where treasury secretary jack lew is expected to call on congress to raise the debt ceiling. he said the government is likely to exhaust its borrowing authority sometime later this

month or early in march. right after the treasury secretary and will be a panel discussion on the secretary's remarks with former george w. bush economic adviser lawrence lindsey and a number of others. this is live coverage on c-span2 and should get underway in just a moment. [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations]

>> again we are live this one at the bipartisan policy center. jack lew is expected to urge congress to raise the nation's debt ceiling today. right after his remarks there will be a panel discussion with former george w. bush economic adviser lawrence lindsey. he will be joined by a number of others and they will talk about what the treasury secretary discusses this morning, the raising of the debt ceiling. this is live on c-span2 and should start momentarily. [inaudible conversations]

[inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] >> good morning, everybody. i'm the president of the bipartisan policy center. i want to thank you for coming out on this dreary morning for

what i expect maybe a sober conversation. and to save time why doesn't anyone just insert their own super bowl metaphor now. so this morning it is my great honor and privilege to introduce the country's 76th treasury secretary, mr. jack lew. secretary lew is a distinguished public servant. is known as an honest broker and a tough negotiator, a long career in washington from working with tip o'neill to president clinton, two tours of the office of management and budget, mostly for a relaxing as the president's chief of staff. the secretary has many unique traits, but most disorienting, especially in washington these days, is he is liked and respected by just about everybody. which brings us to today. a discussion of the debt ceiling. for the bipartisan policy center, i must admit that congressional irresponsibility has been a cottage industry.

as we receive quite substantial out what they deserve credit and putting up essentially the same report six or seven times in the last three or four years. but for just about everybody else in the country this has become a pretty ridiculous and repetitive loan we have revisited on our economy or so to help us understand what are today, it's a great pleasure for, secretary, to ask you to say some words. [applause] >> thank you, jason, for the very kind introduction and thanks to the bipartisan policy center for having me here today. we have many distinct which guests but i'd like to just pull out especially senator pete domenici and my good friend senator olympia snowe, kent conrad, steve bell and bill hoagland, all people i worked with and senator, congressman and secretary. i'm sure i'm missing other people and i apologize.

the bipartisan policy center has been at the forefront of shaping public policy since it was started seven years ago. at a time when our nation critically needs a place for bipartisan discussion on complex issues, the bbc has become the place on a broad range of important topics. a perfect example of that rule is the work this organization hasn't done. to shed light on the significance of protection the full faith and credit of the united states. as we meet here this morning i want to emphasize as the president did in his state of the union last week, this can and should be a breakthrough year for our economy. as the gdp report for the fourth quarter of last year underscores our economy ended 2013 strong and it is poised for growth in 2014. the table is now set for us to belong economic progress we've made over the last five years and it's incumbent upon washington to be part of the solution and avoid the brinksmanship of recent years as it is done so much to diminish

the economic momentum. it was not that long ago that the cross currents of the worst recession since the great depression caused massive economic havoc in pain but with the combination of us with policy response which began in 2008 and continues to this administration and the hard work and determination and resilience of american businesses and workers, we are coming back. the private sector screen more than 8 million jobs. our economy has been steadily expanding. the housing market is rebounding, manufacturing is on the upswing. the audit industry is searching. we're on the path towards becoming energy independent. we have seen our deficits by more than half over the last five years. still we are not where we want to be yet. and not where we need to be. we must continue to build on the progress we've made by doing all we can to help the economy grow faster, help businesses create more jobs and help more americans acquire a basic level of economic opportunity and security. that's why the bipartisan action

in the house and senate to pass a budget at the end of last year and an appropriations bill last month is so noteworthy. democrats and republicans found common ground, made compromises and work together to reach an agreement that keeps argument running for the remainder of this fiscal year. and it makes real policy instead of letting our government run on autopilot. moreover, the budget is at a blueprint for second year of regular order for policymaking, and the specter of another shutdown is behind us. with the economic headwinds generated last year either across-the-board cuts we now see that cut down substantially as sequestration has been reduced. importantly policy decisions in the on the appropriations bill also provided an opportunity to move forward with smart investment and pro-growth initiatives like early childhood education and expand the number of manufacturing. that translate into real opportunity for children to enroll in head start and for students in community colleges

to develop the skills they need to find jobs by learning cutting and -- cutting-edge technology. while this was a step in the right direction, lawmakers have another responsibility that they must meet. even though the house and senate approved a budget, passed a bill to keep the government running, they did not yet provide the borrowing authority to pay for the spending commitments that they made. last year congress passed a temporary suspension of the debt limit the last only through the gory seventh, which is the end of this week. after that in the absence of congressional action, treasury will be forced to use extraordinary measures to continue to finance the government. let me repeat, in a matter of days the temporary suspension of the debt limit will end. the treasury department will have to start using extraordinary measures for the government to continue to meet its obligations. at different times of the year these extraordinary measures provide more or less of a cushion depending on variables that we cannot control. for example, at some points in the year there are large trust

fund investments that can be deferred which provide larger amount of borrowing capacity. at the same time, net spending which varies from month to month determines how quickly the headroom provided by extraordinary measures will last. now, unlike other recent periods when we've had use extraordinary measures to continue financing the government, this time this, this time to measure what it was only a brief span of time before we run out of borrowing authority. in february the same large trust fund investment that was tempered last year are not available and at the beginning of tax five season, tax refunds result in net cash flows that to peter borrowing capacity very quickly. we now forecast we're likely to exhaust these measures by the end of the month. the bpc report issued last week came to the same conclusion. and even though these are estimates, it's clear that extraordinary measures will not last very long. after we exhausted this borrowing capacity, we will be left with only the cash we have on hand and been incoming revenues to meet our country's

commitment. notably, we expect our outlays over the coming weeks to exceed our net inflows. largely due to the payment of tax refunds. so we will draw down our cash balance faster than at other times of year. without borrowing authority, at some point very soon it would not be possible to meet all of the obligations of the federal government. given these realities, it's imperative that congress the right way to increase our borrowing authority. it would be a mistake to wait until the 11th hour to get this done. if house speaker jean ping has said not only should the united states never default on its debt, we should come ethical, we shouldn't even get those two would -- john boehner. delaying action on the debt limit can cause harm to our economy, radical financial markets and hurt taxpayers. just think about it. around this time last year we had a standoff and we saw consumer and business confidence dropped and investors and market participants publicly question whether it's too risky to of

certain types of you as government debt. such a question should be unthinkable. the bottom line is, time is short. congress needs to act to extend the borrowing authority for our nation, and it needs to act now. it's important to remember that increasing the debt limit is congress' responsibility and congresses alone. that's because only congress has the power to extend the nation's borrowing authority. no congress in history has ever failed to meet this responsibility. still, some in congress have suggested that extending the nation's borrowing authority should be tied to spending cuts. but as one republican member of congress put it, and i quote, the time to fight for spending cuts is when you're talking about spending, not at debt ceiling time, closed quote. the point is, as i've noted before, raising the debt limit has nothing to do with new spending. it's about fulfilling spending obligations that congress has already made and paying the bills that have already been incurred.

refusing to raise the debt ceiling will not make these obligations or bills suddenly vanish. and the president has made it clear time and again that neither he nor any other president should have to pay a ransom so the united states can pay its bills. the presidents from both political parties have always stood firm on the importance of protecting the full faith and credit of the united states. we should never push this present asset in a chubby but i urge congress to increase our borrowing authority in a timely manner and provide regular updates as new information about our ability to finance the government has become available. the longer we wait, the greater the risks become. whether it's the economic recovery, the financial markets, or the dependability of social security payments and military salaries, these are not things to put at risk. in the aftermath of last year's shutdown, lawmakers on both sides of the aisle demonstrated that they understood what an impediment washington had become for economic growth. there's no reason to repeat the

mistakes of the recent past. progress in washington around the budget and the farm bill and marked the beginning of a productive beginning of a person action. congress should act quickly to resolve the debt limit without unnecessary delays or political posturing that could snowball into a manufactured crisis that the american people so clearly want us to avoid. thank you very much, and i look forward to taking a few of your questions. [applause] >> all right, we have time for a few questions. and please give injudicious so when you ask one. yes, senator conrad. >> welcome, mr. secretary. good to have you here. we're so glad you're in that position. the question that comes to mind is, what are the single most important things congress could do right now to strengthen the economy and improved job creation? >> you know, i think that the

first thing is just to make sure we don't have a repeat of the kinds of self-inflicted wound we saw last year. we saw over the last two or three years economy is picking up momentum and then things kind of got jammed up in washington and we saw confidence go down. we saw the markets become all about. so the very, very first thing i think congress could do is just do its business. that's what happened with the budget. that's what happened, that's what's happened this week with the farm bill. i believe that the debt limit is the last piece there that has to happen in order for people to breathe a little bit sigh of relief, but we're not going to see the kinds of brinksmanship are causing side, frankly not just here in the united states, but around the world. you know, moving beyond that i think there are quite a number of things weather is a bipartisan consensus where congress could move forward and it really would help the economy. i believe immigration reform has a bipartisan consensus and i believe it would very much of

our economy. i believe that infrastructure investment is something we badly need for a future that is going to be strong and vibrant. and there's a bipartisan consensus to do that, and i think we can make progress on that. i think skills training is another area where, when you go out and talk to employers in this country, i did it on friday in virginia, the question that you get asked, to questions. one is, can we rely on infrastructure, and can we rely on the fact that there will be generation after generation of workers for the skills we need? i think there's quite a lot that could be done to move the economy forward, and i think the fourth item is tax reform. i think this is tax reform, convergence of thinking. so i'm going to continue to be optimistic that there are things that not only congress could do but where there's a bipartisan consensus to move things along. >> governor keating. >> mr. secretary, demographics

are destiny and those of us who served on the ripple in them in japan here the bpc, on both sides of the issue -- domenici-rivlin, we were stunned at what's coming. the cliff once we get over that, it's a chasm in terms of the next 10, 15, 20 years, in terms of debt and deficit in part, education, caused by very good thing to we are living a lot longer. how do we address that? what are your thoughts about that very sees future challenge in the debt and deficit categories? >> when you look at the demographics in the united states, our demographics are likely much more positive than demographics in other parts of the world. we have more young workers in other countries do. we have the ability to grow, and as a mentioned a moment ago, we have immigration reform. we have a history of growing our population by being a magnet for

people who want to have a better life and want to build our economy. when you look at these long-term trends as the president has said many times, there's a need for a bipartisan discussion about how they can get with some of these tough issues in a balanced, fair way. in the past that's how we've made progress, whether as 1983 social security reform or 1986 tax reform. it's going to take a bipartisan consensus which frankly has been a little challenging to reach. when you look at the next 10 years we're on a very good path. we are seeing the deficit drop rapidly. the statistics i quote cutting the deficit in half is a very significant measure. the first step to do with a long-term, if you with a short term. i think we're on a path towards dealing with the next 10 years. i believe that when the time comes for bipartisan conversation, we can keep the faith that social security and keep the program as we know it and keep medicare so it's a dependable entitlement for senior citizens. and we can make the kinds of

policy that over the long term will make a difference. we've had a challenge finding the space we can have a balanced approach, and balance means that you look at both sides of the equation. as we've said in a fiscal policy for a number of years, you have to balance revenues and spending. and that's where the difficulty has coming. so i'm not sure this is the year for the long-term fiscal challenge to be dealt with. i actually believe that we have made so much progress in the short and medium term. we have a little time to do with the longer-term. what we need is to develop a track record of being able to work together, develop some trust across the aisle. and if we can get some of the other things i mentioned done this year and over the next 18 months, that would be an excellent foundation for tackling some of the harder problems as we go forward. >> i think we'll have time for one more question. yes, joe. >> mr. secretary, every time

we've gone around this bush the last few years, you've always heard the statement, the united states should not default on its debt but, and then the sentence continues. and usually the condition is there are things that we ought to do that limit should be a motivated. is it suitable for one side in that kind of a discussion to hold open just in case the prospect of taking the global economy, taking u.s. households down with it, for purposes of negotiation? >> you know, joe, i think what we saw in 2011 was different from anything we've seen in the previous 30 years that you and i worked on budget issues. we had never before seen the argument made to this quote i don't get my way, we will default. that is not acceptable way to do with the debt limit. i think the president had to take a firm condition that --

couldn't have ever year or every six but this kind of high-stakes threat that if you don't capitulate on a matter of broad policy, then we're going to default. because one side is being responsible and says we can't default comment part of another such as we are not. i think the president's position on this has been a very principled one. he has many times said, if you split the parties around and have a democratic congress and republican president, he would just a strong believe it's an obligation to pay our bills. the truth is we're one of the very few countries in the world that separates the spending decisions from the decision to bar and pay for it. we saw the senate move forward with and innovation, mcconnell rule, which made obligation for congress to deal with a couple times for putting it on the president to raise the debt limit and give congress the ability to object without blocking it. so i think there's are ways we can deal with is to give both sides a chance to have their views as very much reflect. what we can't do is we cannot

for a moment accept the notion that for the first time since 1789 the united states would not pay its bills in full. that's not acceptable and, frankly, it's not acceptable for leadership on either side which is why i'm confident it will be addressed. and hope what it will be addressed in a way that doesn't cross the highway brinksmanship that do so much damage to our economy. >> i have a very big job in a short time. in that sense, i had the luxury of introducing secretary to the united states senate republicans when they were getting ready to approve them for this job and that was a real pleasure then. and today, again, i thank you for me to you for all you do and what you have done since you have become in this last and very high job that you've had.

so my job is to say thank you, mr. secretary. >> thank you. [applause] >> now, it's my privilege to introduce steve bell who is going to moderate our panelists. mr. bell. thank you all very much. [applause] >> thank you, senator. we have the good fortune today have one of the best economic reporters in the country, sudeep reddy, as our moderator. he told me only two things. make it short and he will be happy. those two things are in order. so, sudeep, you of what a lot of awards. i won't go to the. you've got a lot of great stories. i will go through that but i would like to introduce sudeep reddy from "the wall street journal."

[applause] >> don't be panicked. we're just changing the stage, i've been told. [inaudible conversations] [inaudible conversations]

>> we have our panelists coming up here. >> it is a really great panel here so we do want to jump right in. you have the full bios of everyone here in your packet. for those of you watching outside the room, all the files are on the bpc website, bipartisanpolicy.org. we have amanda sayegh is a senior treasure representative for the austin government here at the joint embassy in washington. rudy penner, former director of the congressional budget office now at the urban institute. larry lindsey, former director of the national economic council at the white house and former federal reserve governor now running the lindsay grew.

paul sheard, chief global economist at standard & poor's, and tony fratto, a former assistant secretary at the treasure now runs hamilton place strategies. larry, i want to start off with you with a simple question. have the american people gained anything from having a debt ceiling? >> thank you. it's a pleasure to be are today, and i guess i got the first question because -- [inaudible] i think the answer is yes and they think it's important to take a look at history. in order to understand what that is. as a way of introduction, i just thought i would correct slightly something the secretary said about the shooting on the other foot, right? when the president was senator he voted against the debt ceiling, and said washington shifting the burden of bad choices today onto the backs of our children and grandchildren. america has a debt problem an affiliate of leadership. america deserves better.

so you know, when one is in opposition, that's quite a natural position to take and take it's important to put that into context as we consider why we have set it up that way. you know, we have a basic set of rules throughout the english civil war, we find in the constitution that basically come down to no congress been able to bind a future congress. that's important that each congress has to take an affirmative step, an affirmative step to do any kind of fiscal action. now, the founding fathers put it in article 1, section 8 and they took out the most extreme case they could have, which is the country was at war. and what did they say? well, the congress could only appropriate money to fund those armies for a maximum of two years. they have to come back even in the extreme situation where the country was at war and

affirmatively vote for more money. now, i can understand that and i won't bore everyone with a reading of history but i think we all understand why that's important to that's actually where the debt ceiling comes from. that's the way it used to be. and in 1974, for very, very good reasons, we get a budget reform and we created a category of spending but that was not subject to congressional vote. we now call it an entitlement or non-discretionary spending. and so every year we simply continue it. now, you consider simply funding the actions of the past congress come about remember, the constitution, all supreme court ruling, and president is that funding what they pass congress did isn't the source. they're still supposed to be an affirmative vote of the current

congress to continue spending. well, okay, fine. we understand the easy convenience of the ruling class involved and we don't want to have to take tough votes so this is why we do it. what let's look at how far that's been expanded. we've gone him automatic social security increases -- have gone from automatic social security increases. we now have the affordable care act which is entirely an entitlement. well, all right, so lets think about the insurance subsidy. insurance subsidy, we don't know how much it's going to cost and so we will set the row how much individual has to pay and we have an unlimited, not constrained by any known economic variable, funding everything on top of it as an entitlement. well, i can sort of see how that might reach out there but we also have another entitlement of a competition of how far we pushed his concept of no need for congressional appropriation. it's the wrist recorder. so here we have congress not

even saying how the wrist recorder is going to be fined. it will be and it will be entirely made up by the president and the entirely at the discretion of the president. that is non-discretionary spending. come on, that's the essence of discretion. so if a going to have an entire culture which now funds three quarters or most of the budget spending and we're going to say congress, you have no say at all in funding those three quarters, i think we can push the limit here, and they think that a given, it's the favorite, the ecm continues of government but i think we're giving up something in the process. and though i think it's an inelegant way of doing it, i think the right path forward is actually to have negotiations, and the reason you have the debt ceiling and the reason you have -- is to force decisions. the president has said no problem eyes. he said no previous presidents

have ever compromised on the concept of paying your bills to i think that's right. every president has negotiated with the congress but and sometimes in a big way. reagan did in 87. bush did at andrews air force base, give up on his no new tax pledge in order to meet the debt ceiling. president clinton did it first with the democrats in 93. did it again with republicans in 95, and there are seven of these negotiations during bush 41. the reason the debt ceiling is there is for the power of the purse. that's it. you're supposed their negotiations leading up to. the negotiation should of taken place. the president refused to negotiate and i think it is a just slightly slightly inappropriate to say i voted against it but now communicable you guys have to vote for it without even negotiating with me.

so there we go. sorry, i went on too long spent i will bring us back to the distention between appropriations and spending versus the debt limit because i can see rudy's mind racing. but i want to start with rudy, on a separate issue. as we look at the debt ceiling at these panic moment in 2011, 2012 and 2013, the most common thing people say under the breath is, there must be a better way. you have thought a lot about this. is there really a better way? >> well, certainly there are a number of better ways i think. basically, i fundamentally disagree with larry. i think that limit is across basically. there's a paradox here, and that is they always say that to be effective in negotiations you've got to be willing to shoot the hostages. we've never been willing to do that in the 100 years that the debt limit has been in existence.

the real place to negotiate over spending and tax matters, and including entitlement, is when you're debating the budget resolution. that's when we set our targets for spending, spending and revenue. having a separate debt limit, i don't think it serves much of a purpose but it certainly hasn't brought about fundamental reforms in and out of his. one of the biggest things that happened about the debt limit was a gram log that go to begin by person. once the debate got going you hardly heard any mention of defaulting on the debt. so in terms of what to do, obviously my first choice is to get rid of the debt limit law altogether. my second choice was alluded to by secretary lew. he noted what senator mcconnell did in the past representative honda has a very

similar approach in the house. the basic idea would be that you would give the president discretion to set the debt limit a year in advance. the congress would be able to disapprove what the president did. the president could veto that law and then you would need a super majority to overturn the veto. my second choice would be to go back to the gephardt rule them which works very visibly in the past, and that is a tie, the increase in the debt to the budget resolution that was passed. there is a practical problem with that. if you do that very rigorously, you've got to confront the problem that we don't forecast deficits very well. indeed, we often make huge mistakes. so to make that rule work practically, i think you would need some flexibility. it needs a margin of error

there. my fourth favorite thing to do would be to do what the australians did, but i'll let you explain that to us. >> and that is why we have amanda sayegh you. your country does have a debt ceiling. none makes a greater spectacle out of and we do. but i may become is relatively new in australia. just give us a little bit of perspective on how it came about and how it works now. >> the ostrich express with a debt ceiling is relatively new. prior to 2008, we did not have a debt ceiling. what tended to happen the government what passes borrowing authorities each year alongside its appropriation bills. so the decision would be made around the budget and the financing decisions would be made at the same time. in 2008, australia was in a unique situation of having a declining government security's market. it was running budget surpluses. and it did not have a standing authority to borrow in the

absence of a deficit financing requirement to maintain liquid government debt market. so it introduced a debt ceiling at that time of around $75 billion so it could basically go through the act of issuing securities to maintain an efficient and liquid government bond market. it wasn't binding at the time. but as i said, the government was running budget surpluses but that changed with the onset of the global financial crisis, which impacted budgets around the world, including our own, and the government also undertook stimulus spending at the time. the way in which the global price played out, there was a need to increase the debt ceiling in australia which happened on a number of occasions around our budget. but in december last year we got to the point where we were running pretty closely up against the limits of our borrowing authority. and there was concern at the time about what impacts, not increasing the debt ceiling on increasing it to insufficient

level might have on financial markets. the government proposed an increase in the debt ceiling the 500 billion from a level of 300 billion. this was not supported by the opposition in the australian parliament, and one of our minor parties, the australian greens. they support instead increasing the limit to a low-level of around 400. so still increasing the limit but not to the amount that the government had determined would be sufficient to covering its board authority over the next couple of years. given th a time limit and incids that were around at the time about the impact this could have on financial markets, a deal was eventually struck remove the debt ceiling altogether from the statute and so as i said, short express, and lasted from 2008-2013. in its place the australian treasure was equivalent to the treasury secretary who just

spoke here in the u.s., is still required to issue a direction as to the maximum limit the government can borrow. that direction is tabled employment but it cannot be disallowed by the parliament. so that's pretty much where we are now. >> we all know there are costs involved in defaulting on the debt. that's a scenario we often discuss. either costs involved in debating whether we would default on the debt? is this something we can measure their backs and on the other side of the, are the costs in your mind involved in not having a debt limit at all? >> before getting to the question should give, but my perspective on the table, which is when i look at this issue, and it gets very coveted computers political system as all know is very, very complicated with divided government and the congress and the executive, et cetera. but then you have with the debt limit issue essentially that complexity sort of multiplied by two. because you have the budget process appropriations process,

essentially a question how big a deficit you were run, and then you this separate discussion of how much debt will be authorized. if you look at it from a decision problem, it's a question of stocks and flows. you have a variable which is running a budget deficit which is a flow and that would then lead to a stop of debt. you really only need to sort of decide on one of those two things, not both. you can decide on been independently of one another. so i think looking at slightly more from a market perspective and also shall to bring in the rest of the world into this equation, it just makes a very, very complicated and rather opaque and difficult to understand process. now, why is that important? it's important because this is not just an issue about domestic u.s. fiscal policy. by the u.s. treasury security stand as essentially the linchpin of the global financial system. they are the an ultimate faith

risk, hopefully save if they don't default, the free liquid asset which is embedded in the whole, not just in u.s. financial system of the global financial system. so the whole thing appears i think to many market for disciplines is ones that i would have a dialogue with us to move around the world is sort of an unnecessary issue which then layers potential noise and then potential costs into the system. ..

i have said in the past that you know the debt ceiling has as a rhetorical opportunity you know probably serve some function for some period of time and i would just give you some of the negotiations that took place in the past that opened the debt ceiling and really open the budget. with the debt ceiling often became an opportunity for congress to use that data and have a conversation about the size of the debt. we could use it as a reminder, sort of as a rhetorical school to talk about the debt that was useful but once it became, once people started to take it seriously and i say seriously in the sense that there might be an opportunity to not grant the authority for congress for the

administration to access the revenues to execute the programs that congress is mandating to execute. once people started taking seriously that was possible than the cost became too high as far as the rhetorical benefit of it. you have to remember the debt ceiling was not created really to replace a strong constraint on government. we can go back to the english civil war when there were real concerns with kings trying to find other ways besides going to parliament and asking for tax revenues without other ways to get revenues to fund wars and other things. this is why parliaments and the legislature sought the power of the purse. in this case the debt ceiling of the united states government as a matter of convenience to save congress and the burden of having to specifically authorize a treasury to go into debt

markets on a serious basis. every time congress or the treasury is seeking to lower the debt markets congress had to do this so congress relieved himself of that word and by simply just throwing a debt ceiling offered that would prevent you know the administration from going willy-nilly into incurring debt on the government. so it was really a matter of convenience. it wasn't a matter of trying to really restrain the executive in that way and we can talk about what the cost of that are and how that has changed over time. but lost in that process and i think even in the case of then senator obama and others a real misunderstanding of what the debt ceiling really is and why it has become anachronistic. >> call, every time this issue comes up there's usually a bill moving through the senate the

house or both about privatization, the idea that maybe congress can pass a law to say that the treasury secretary can pay the debt but not necessarily pay everything else to give us more leverage so we can push this issue even more. how would markets look if it were to pass, which it probably wouldn't how would markets look at a default on general obligations while the u.s. continued to make debt payments? >> well, i don't think you really want to put the word defaults and u.s. fiscal policy of the budget in the same sentence. when this issue did come up last october or november when it came to a head last year market participants were furiously trying to delve into this issue. a lot of people were trying to understand the plumbing of the financial system and how does it work in some of these esoteric

issues. i think the conclusion that many people came to us that it's just far too clever. it's too complicated and again what is really being done in the service of if at the end of the day this is all about this rhetorical issue or hardening chip which at the end of the day is not going to be played. i don't think that is really the right solution to this issue and i don't think by and large markets would breathe a huge sigh of relief if something like that were to pass. >> you look at this issue and it's pretty clear that the speaker of the house, the senate majority leader and even their number two's do not accept that the united states will default. the leadership does not accept that is ever an option and if everyone views this as a spectacle to use as public debate when in the end something is going to pass to raise the debt does any of this matter at all? shouldn't we just ignore this at the leadership in both houses

are going to ultimately lead a debt ceiling increase go through because they don't want the mess on their hands? >> first of all there's no argument from me that this is an inelegant way of doing it. the question is, do we want to have, do we want to have the capacity for unlimited spending by government without ever having to force a read visitation of that issue? and it is an inelegant way. unfortunately because of the budget act of 74, it is the only, it is the only point at which this can happen. and the problem is getting worse again, i'm going to try to turn the tables extremely on the other side. does anyone really think that the risk and you represent them maybe, the risk quarter payment

to insurance companies should take place without congress ever voting on a? i mean, that is a nondiscretionary or a nondiscretionary item. come on, folks, we need to revisit the budget process. so my first choice is not one you mention. my first choice is let's go back and look at the budget act of 74. talk about failures, the budget act of 70 for his failed. we have had asked loading deficits and debt and everything else since it. there are elements of the budget act of 74 that are designed that way. some things is one year in something since 10 years. not doing a value presentation on title production for example brings the political case against retirement reform. we need to revisit that issue and is part of that revisitation we have put in simply every congress simply must re-approve

whatever you want to call entitlement just so there is a boat there that congress is actually forced to confront the choice. absent that, we now have a completely runaway spending process. >> that's the beginning of the first page of the bill right there. remove entitlements from autopilot and remove the debt ceiling. without work? >> well something larry indyk and can agree on to revisit the budget trust us. and it's not working. nobody will claim that. on the other hand, i don't see the debt limit as being at all substantive for the budget process. what have we accomplished in having it other than to create policy and certainty and there is now a lot of academic evidence that policy and certainty does affect it and so

on. so i certainly think we do have to revisit the budget process. i think we have to revisit it in just the way that larry said. that is to say we have to start inking about ways of imposing a budget on entitlement spending and on medicare and social security. just stepping back, countries like the united kingdom and canada who have a nationalized medical system they have the budget for their health costs and they live within that budget. now it's really radical to think that we can go that far but i think there are ways that we can limit the growth of these things and some of the ways have been already discussed in congress. things like premium support, things that the bipartisan policy center have advocated for both medicare and medicaid. so there is a way forward.

i think the question is how one earth can we do it in this political environment? >> when australia got rid of the debt limit there were concessions to do that. transparency was one of them. do people actually notice what happened as a result of the concessions and doesn't make any difference? >> at the time of the debate, there was a lot of attention around what might happen and how this would get resolved in parliament. it was the greatest part of the the -- concerning the party that the government would include more titles on interest associated associated with dead wire debt was changing in all of its budget updates throughout the year. there was also, and this was legislated so this was a requirement grounded in legislation now. it was also a material change in the amount of debt between budget updates which we have

around every six months or so over 50 billion which is in the australian budget landscape that we would have additional debt statement setting out the reasons why there was such a material change in the government's borrowing requirement and there were some nonlegislative requirements around this as well setting out why the government was borrowing more to make revenue shortfalls or to make changes in spending. what was the spending for? was it on infrastructure as well as part of our long-term budget reporting statements we do as well. we are just near the start of the face of this reporting. the first occurred towards the part -- and of last year so we don't know whether this additional transparency is how the public is reacting to that until it's fully rolled out as part of our budget and subsequent reporting.

>> we now there are a couple of different stages with the debt limit. one is at the end of this week when we reached the limit and the secretary of treasury pulls out his bag of tricks. he starts using extraordinary measures which have gotten more and more creative over the last couple of decades. whenever we see this there are people who say why are we going through these extraordinary measures and the phones ring off the hook here at the bbc with people trying to understand when is the government actually going to run out of money and what is the real date that we have to do this? is there any value of figuring out a way to get rid of extraordinary measures and just set a date so we can deal with the date with a deadline on that date or do we larry want the flexibility given all the risks in our political system and give it a little bit of flexibility for the treasury to deal with this? >> let's start with a fundamental principle. even in the australian context

which has a unified legislature there was compromised. to have the secretary stand up here after the president saying i'm not negotiating negotiating, a given the extreme position here is no negotiations, no concessions to get this through. that is the extreme position and that's what has to be modified. now as far as you want with a room, i'm for all the wiggle room you can get because we have a very complicated political process in spite of its problems. i think it's probably the best mankind has been able to devise but you need to have to avoid the cost of friction. until we get to some preferred solution, which i have laid on the table which is reforming the budget act of 74 let's have all the greece we can on the wheel so they don't freeze up.

>> basically then you end up trying to have, everyone tries to have multiple ways so it's either break or not rink with the parachute and but you could have it or not have it. you could have extraordinary measures are not have the extraordinary measures. i think it's crazy that the u.s. government has to go through these kinds of contortions to try to meet the obligations through these periods. it's incredibly inefficient and it is costly in the short-run and at the end of the day it's a radical position for treasury. i'm so envious of the obama administration's view on this because you know with both democrat and republican control of congress we had to go to congress and beg congress to do the thing that in retrospect now

i understand, congress will pass the debt ceiling. congress will pass, congress will raise the debt ceiling. it's the only thing i'm really certain of and so the administration does not have to negotiate because it's not in a negotiation. there is nothing to negotiate. congress will pass the debt ceiling and it's true that the stakes aren't as high as this congress has taken up in recent years but i will tell you every one of those negotiations that we had to do with congress the vast majority of them are not on a serious issue. they were not. a member of congress wanted someone to be on a board or a commission. another member of congress wanted to get a promise that you know we would agree to send someone up for a hearing on cuba policy. completely unrelated things. it would be great if we could

have real debate and discussion on long-term entitlement programs. i think everyone here would agree that would be a really useful event if we could have that negotiation in that discussion on the big issues of the day on tax and spending and long-term obligations but that is not what this doubles and two. what it has really become is an abuse on the part of the legislative branch on the executive and the executive has finally realized that a test is take a step back from the line and say no, we are not going to allow ourselves to be extorted in this really unnatural process. you devised the debt ceiling. it's a congressional creation and you will, and you understand it's your obligation to get us out of it. that is where we are right now and i think it puts the executive and the legislative and a better position to go forward to have this kind of debate on other theories that

are more natural. >> rudy obviously lawmakers use this issue to get attention. they want to raise money. there are a number of reasons you might do and some of them actually do care about the issues and are just trying to get elected. do you think when the public pays attention to this when it becomes a pressure moment, a crisis moment that they are more informed as a result or less informed as a result of having the debate the way we do? >> well i guess 70% of the public has never heard of the debt ceiling, but in any case certainly the debates we have had in recent years about the debt limit or about the budget unfortunately haven't been that informative. i do think that if there is a crisis i am hopeful that the congress will deal with it in a rational way.

i think the one thing is if you look at other democracies that have had crises like sweden and we can debate whether canada was a crisis or not but it looked like a crisis to me, they had ultimately solved the problem in a congressional way. not true of a lot of the countries of the former soviet union where they tried to resolve the problems simply by printing money and that is the most disastrous way of solving the problem because 10000% a year and inflation is not a good thing. i don't know, somebody may contradict me but i don't know of any developed democracy since world war ii that would solve the problem that way so that gives me a little bit of reassurance that when the crisis comes, that we will deal with it

appropriately. >> one of the things we saw in a sober when this issue was being debated, investors pulled out of the short-term treasury debt the shortest maturities. they didn't want to get stuck with that given the risk of something like that happening and we have seen something like that already. what is the cost of that development? >> it's very difficult to put numbers on the cost when something can be done actually maybe the governing accounting office did some studies here and we put some estimates on it going back to 2011. i think it's been looked at in a little more detail but there certainly are some short-term costs and certainly market participants were reluctant to hold short-term securities just around the d-day if you like. there are also you know frictions produced into markets because treasury used for repo

operations essentially like an oil greasing the wheels of the political financial system. as i intimated before investors whether they liked it or not have to start doing quite extensive contingency plans. everybody was looking at the situation saying surely the u.s. will not default on its debt and of course it hasn't and it probably never will at least in this way and yet everybody has a fiduciary duty to their investors and other stakeholders. so everybody had to do this extensive contingency planning. how much collateral are we holding and what is the exposure to an event in this space? the other thing is this is like a black swan tail event. nobody really believes it's going to happen but what if it did? what would the consequences be and i think the reality is that is when the cost, not the cost that were incurred last year in 2011 but it's the what-if scenario and the fact of the

matter is nobody really knows. but if you just contemplated for a moment you can certainly tell some pretty scary scenarios about what happens to the global financial system. one of the lessons we learned back in 2008 in particular was that markets actually and market participants didn't know an awful lot about the economy and a lot of people were blindsided by the fact that something that looked innocuous relatively at the time a downturn in housing, some problems with sub prime security suddenly generated this toxic waste if you like through the whole political financial system. there's a similar level of kind of uncertainty about well what if the lynchpin of the global wheel and the risk-free asset of which everything else is sort of price were to actually default? what would that do to that system? nobody knows but we don't really want to go there. >> paul first of all i agree with everything you said.

let me put a slightly different interpretation on it. first of all the markets are are doing due diligence that they should have done before. i think that's an important thing. second of all this give some credit to the american economy and the markets. i remember around the time of the september 30, the media machine was cranking on how this was going to tank the economy and quote quote you were all ready seeing signs of the economic slowdown. it turns out the best two quarters we have had in years where the third and fourth quarters of last year, right smack the ones that were supposed to be so devastated by this. so i think we all need to take a little deep breath. we are very sophisticated country. i'm circling not in advocate of going over the cliff but come on guys, let's grow up. we are trying to do this for our own convenience to avoid taking tough votes to avoid negotiations. that is what the president's

position is in tony when i was in government i also shared your view that the founding fathers made one big mistake and it was called article i. i get that, but that is not what we have. we are a country that moves slowly based on negotiation and compromise. let's negotiate and let's compromise. we must realize we have a really robust system. >> i see incorporated the relationship between the markets and policy is incredibly complicated. i would like to thank we are vigilantes out there that would force us to discipline the system ultimately. i think one of the more interesting articles written on all this in recent years was by niall ferguson who wrote an article called the 300 years of sovereign debt crises and the really peculiar thing about most of those crises was that markets

remained very calm while the countries budget went to hell in a handbasket. one day they didn't and something would set them off. they all said it's a bit of bad budget on an otherwise dull newsday. when they are set off they are really set off. that is to say interest rates go up three or 400 bases points. >> we will get questions from the audience in just a second. i'm manda and then tony, there is a lot of work that is done as the debt limit approaches talking with investors and talking with the media explaining what happens. amanda and australia how is this community -- communicated to markets quested except there's a political process here that needs to play out and does the public pay any attention to that? >> yeah so we have never gotten to a situation where we were faced with such limited time between parliament and making

the decision to increase its debt ceiling and when it was going to run up against the limits of the debt ceiling so it was a new situation i think foreign investors. there was some concern amongst those in the government that if the debt ceiling was not increased or increased on an efficient level that investors would begin to ask what happens when mr. elliott gets to this point? what is the process? doesn't have what the u.s. has? does the treasury have capacity when this its cash management to do these sorts of things? also we have got a parliamentary system where the debate was really in this environment about what level do we increase the debt ceiling and it wasn't a debate over ground not increasing it back over the level that it was increased to. behind the motivation of the government to increase the debt

ceiling at the time to 500 million was to cover what people could clearly see was going to be the israeli government's borrowing requirement for a number of years with a bit of a buffer on top of that. it did not want to be in a situation where in a few months time or a years time it faced a recurring debate. it was to provide some kind of certainty to markets that as you can see from the predictions the australians treasury has put out it's going to need to borrow a certain amount in the parliament has the authority to do that when it's required. >> tony did you ever prepare for the possibility that extraordinary measures would run out? d. yeah and i think everyone who has spent time it treasury has done that. >> an inordinate amount of time in explaining what the measures are and how they work but on the macroquestion if we could give some members of congress to pass on this.

it's not that there are members of congress that don't understand the debt ceiling conceptually. that is not the problem. the problem is that people don't understand the debt ceiling. if you go out and do a poll and ask people what they think should happen with the debt ceiling they don't say we should raise the debt ceiling and negotiate to get good policy but we should not raise the debt ceiling at all. 60% of americans say we should not raise the debt ceiling period under any circumstances because their belief is that that will somehow limit our ability to go into debt. so we do a really poor job i think and we can see efforts to go out and educate on what the debt ceiling actually is but the ads during the super bowl last night, only during the first half. with our luck senator it would have been in the fourth quarter.

but we need to help educate so it's incumbent on members of congress and others to educate him what it is. there's a full range of fiscal issues that we are dealing with. they are significant and important and have long-term consequences for the country. >> one back there. do we have mike's back there? tell us who you are. >> my name is susan irving and i direct the long-term fiscal outlook and debt management and so i am a big fan of article i mr. lindsey. also as the co-author of the first launch of the fiscal ballot report calling attention to the long-term i would want my comments about the debt limit to not be heard in any way as doubting that but i would like to suggest the 74 acted and create backdoor spending.

i would like to suggest actually her goal of wanting congress to have to look at the debt consequences and spending and revenue actions is actually hurt by an after-the-fact debt limit rather than helped. that is now people can write to their elected officials and their elected officials can vote for increases in mandatory spending cuts in revenue emergency supplementals without an offset and then later wrote against paying for them. so it becomes a free vote and if you are really seeking to look at the long-term and try to change fiscal policy it seems to me the time to pay attention to the debt consequences of actions is not when you're deciding whether to raise the debt limit after-the-fact but at the time you are deciding the spending so i think it would be important to separate out, i guess i'm asking what you think of that. >> first of all i think those are both good points. i would like to make the

distinction here between a congress that votes for the goodies and a congress that is forced to vote on paying for the goodies. that is where the problem lies. so the congress passed goodies back in november and now the new congress which is then asked to either vote for the debt increase or the tax or what have you, now that to me smacks of one power binding the other which is the decision on an analytical point of view. the problem is that makes it hard for the country to change its mind. i will be the first to agree with you that the debt ceiling is a very inelegant and inappropriate way of enforcing that it is the only thing we have left. so i would much prefer to revisit the budget act of 74 in a way that created a different kind of consequence so that at

least the guys who got elected in the past who passed the goodies have it a little bit tougher in that their decision can be reversed more easily later on. that is what i think we need to do and i think we need to constrain. in body. >> you are right, in the ideal since all the people who ran up these big deficits should have been forced to take debt loads to pay for them. again we go back to the case of the risk corridor now entitlement. we are now to the point where there is literally no check ever on spending. we could make the entire budget entitlement and it would be complete automatic pilot. i can see the slope we are going on and i think we have to find a way. [inaudible]

>> look, are we debating whether or not we have a responsible government? we have been irresponsible government and is there anyone who's going to disagree without? no. do you think we have a responsible government? >> i'm an employee of the u.s. u.s. -- i believe we get the vote government we vote for it. >> in a bipartisan way we have done a lousy job in this country. let's face it so we have got to figure out how we are going to go forward in getting and changing that. i don't blame the people for being mad and the reason people don't want to increase the debt is because that is what they see. they don't see the place being run well so i'm with you, let's find a way other than what we have of solving this problem. this is not the way to run things in the biggest economy of the world. >> questions? in the back here. we have got one up here.

>> mark trumbull with the "christian science monitor." just wondering what this being an election year there's a lot of talk about how this should all get resolved more easily then maybe it has been in some cases in the past. do you all think that this will get resolved easily and what is your outlook on how that will happen and what timetable and what way? >> predictions anyone? rudy? >> i think it's a fundamental question here. is the debt limit a real thing? we have heard from numerous people on the panel and other people that we will never default, so how is their bargaining power if we will never default? i have found speaker boehner's recent comments rather puzzling. on the one hand he says we don't want to default on the debt.

on the other hand he says we want something from the debt limit. i think the safest prediction right now is that yes it will go smoothly and there will maybe be some symbolic thing. maybe they will link risa spending cap for 2022 or extend the spending caps of 2022 and 2023 that's another matter, so probably something will happen and the thing will go smoothly that there is always the slim possibility out there in the irrational world that there will be an accident and we will actually do something very stupid. >> there's always the issue of an accident. can we get the mic right over here? >> hi. bob bixby. there seems to be unanimity that this is not a very good way to

end the budget and debt and i would agree with that. i don't think it's a very effective bargaining tool in the sense that firm what rudy said you can't ultimately pull the trigger. the president can say as tony has pointed out i'm taking a position and i'm not negotiating on this and the only alternative is default which nobody wants to do. on the other hand there should be some sort and i share larry's view about unrestrained entitlement spending in the budget process. isn't there a better way? that question came up before and i'm wondering whether what we ought to be doing in the debt limit is thinking about debt limit reform, so i guess my suggestion now would be as we have to pass the debt limit increase and people are wondering what to put on it as a

condition or as an attachment. why not attach a debt limit reform commission, some sort of process that would look at all these issues and try to come up with a better way of tying the debt to the economy and as stu irving pointed out the fiscal decisions as they are being made. i think having some sort of restraint is a good idea, essential really in this entitlement dominated budget and yet the current situation doesn't put fiscal policy choices on the line. it puts the nations creditworthiness on the line which is not a good thing. >> debt limit reform commission. can there be an agreement in congress? >> we are really talking about budget process reform and follow what the founders got right. they didn't get budgeting right. they got budgeting wrong in some of that is the legislative branch saw its role a little bit

differently in those times that we have a screwed up budget. it's hardly call the budget process. it's not a functioning process because no one is really forced and i understand the motivations but no one is forced to come to the table and really have that necessary negotiation. except we do budgeting now, we do budgeting when we have and it goes to the political question also. we have the president of one party in both houses of congress controlled by the other party. that tends to work. that is because they are forced to negotiate with each other. otherwise we do budgeting either we run out of darling our wing authority or run out of actual money. that is what we are forced to then negotiate and it's crazy to have to do it in those kinds of really again i'm natural

circumstances. and damaging circumstances. i don't know what the right answer is to there should be a budget process that forces the two branches to come to the table and negotiate but not at the risk of -- this cost is too high and you can argue that shutting down government is not too high a cost. it's costly for everybody. we saw that last year. it's costly for both the legislative branch and the executive but maybe there's a way to do it to propose costs that don't also threaten again the full faith and credit of the u.s. government. i think everyone agrees that no one to do that. no one wants to see us damage our cost of borrowing. that is too costly so we do need the budget process reform.

>> do we have a microphone? >> having lived through this repeatedly, i think we can all agree defaulting on the debt would be a disaster. i don't think anybody would disagree with that. on the other hand, not facing up to a growing debt over the long-term is a disaster of its own kind. and i can just tell you after being in the middle of these discussions for a lot of years, it is really hard to get colleagues to pay attention to where this is all headed especially when in the short-term deficits are coming down dramatically as the secretary correct to point it out we can all acknowledge that's the case. it's also true that our long-term situation is unsustainable. and i will do it is incredibly hard to get colleagues who are facing an election always at the

most two years away, to focus on the long-term. the only way we got old simpson was a group of us said we would not vote for any long-term extension of the debt and less a commission was put in place to come back with a plan. so i find myself a little torn here because i know the only way we got something that -- we would not vote in any long-term extension of the debt without a commission to come back with a plan. so, to me budget reform, we have to truth these things up. the decision to spend ought to be linked to the authority to borrow. separating them really makes no earthly sense and that would i hope force everyone to put the two together.

what are we going to spend, what are we going to tax and what are we going to borrow and put them together. it seems to me that would be a fundamental reform that maybe could people could agree on. >> rudy. >> the ways and means committee and the appropriations were unified and that was placed you could coordinate spending and revenue and so on. all we have got to do is persuade the congress to merge the appropriate finance committees and we will have the problem solved. >> anyone else here? >> in terms of the rationality of our debt limit does anybody recall that in the budget that we submitted in february of 200n administration when we are running budget surpluses and it

was projected that within a dozen years the debt held that the public would be paid off. well within those dozen years that debt limit would hit its limit again. because of the fact that the debt subject emmett included debt not held by the public. could it be more clear? >> i remember it really well. larry probably remembers too the early part of the administration and certainly the treasury had this debate of wondering this -- what this was going to mean because the critical importance of the treasury debt markets not just for our ability to raise money but locally. we maintain rich deep liquid markets and it's a benchmark for credit markets everywhere in the world. what if that market diminished

so much that it became less liquid, less rich and less accessible for other countries? where would the money go? these kinds of problems but yeah we look over the same time horizon and realize that regardless of what we do especially in the discretionary spending side we are going to come back to exactly these kinds of issues and those markets would return. >> we have one here from the senator. >> just like my former colleague senator conrad there is no question that the budget process is dysfunctional and even though it could be reformed the question does get back to the fact that people don't implement in congress can ignore the deadlines and all of the other prerequisites in the current budget act and we have gone

around it. i have never seen the process so as it has been in the last few years. it's not even addressing the budget resolution so you can't even have that kind of debate. i know inside the beltway everyone says the debt ceiling will be taking care of and congress will ultimately approve it. but i would be interested paul in hearing your views and larry's in anybody else's with respect to what degree do the markets factor into that equation or what are they doing now to adjust to the uncertainty that now is upon us with the deadline this week and obviously by the end of the month the secretary runs out of his ability to implement extraordinary measures? >> i think things seem to be a little bit, and this time around. i think markets have seen this picture before and know what the ending is. i think my sense of what the market is it's relatively calm.

the question was asked before about what the prospects were for a smoother deal and i think the prevailing sentiment probably everywhere around the world is that nobody really wants to go through that angst of october and november of last year. and the point that rudy has been making, it really doesn't make sense as a bargaining tool for the side that seems to be using it as a bargaining tool, it's sort of a game of chicken. the game of chicken only works when both are bargaining with one another and at the last minute both have to link. if one side is going to keep going and the other side is really advertising up front we are not going to drive right into the headlights, there really is not a credible bargaining process that is underpinning it. markets kind of get that but as we have talked about before they still have to do the kind of stress testing testing and conty planning and cope with the

what-if scenario. i think at the moment we have generally got a sense of calmness about shirley they will cut some kind of deal this time. i think the idea that was raised before of well what about using some kind of the circuit break or where it's not just the canon is not just kick down the road for another year or two but something good comes out of this, that seems to be the prevailing consensus for the whole discussion here this morning and everybody agrees the system can be approved. maybe they need to take it off-line and get advice from the policy center in the gao and others is something that looks like a more robust proposal. >> last year the way the markets respond was the money that we were going to quote payback or the debt that we were going to payback at the end of the month. those securities fell in price