internet. bridging the digital divide to engage one student at a time. bringing you closer. cox supports c-span as a public service along with these other television providers giving you a front row seat to democracy. >> a conversation now on the national debt in u.s. economy with christopher russo, research fellow at george mason university proves that working at the federal reserve in new york and chicago, the house acted yesterday to raise the debt ceiling ahead of potential defaultnt, why do we have a debt ceiling in the first place and why do we keep creeping toward potential default clips? >> thank you for having me on. the debt limit began recently in our country's history, created in 1917 as a way for that u.s.

treasury to more ably fund the war up until then, congress usually authorized each individual issue in the treasury debt and issued it for specific purposes. issuing debt for the panama canal but with world war i massive increase in government spending, it no longer became a reasonable thing to do so the debt limit on the one hand gave treasury more ability to better manage the treasury cash and debt on the other hand constrained treasury to make sure they were issuing too much debt relative to the muscle spending congress authorized brief debt limit evolved over time and more recenter years, is been used kind of as a backwards the spending or at least attempted to be used in that way. the consequence of that in the last eight decades, we've had these every two years with false

episodes where it takes a lot of political pressure to get a debt limit raised if they don't default on their representation. >> they raised by 480 milli- dollars expected to by the treasury department two or three months here until we have another debt limit default approaching. is it worth still having a debt limit if we continue to have these issues? >> i believe the debt limit poses a danger to the u.s. economy in our financial system no longer worthwhile. the congress authorizes spending attack as a treasury does the budget mandate deficit, the treasury should be able to vent undertake actions necessary to finance thatt deficit. i will also stress we do face long-term fiscal analysis are

debt levels unsustainable for basically all of human history suggesting is not going to work out well if it continues i propose progress has two essential issues together probably trying to find middle ground in washington to get a solution through that would be. a permanent dissension of the o debt limit, we don't have these crazies every few years along with long-term budget unsustainable rising growth as well as for our economy. the world weekly rosary with higher spending. >> democrats with funny criticism factor limit. survey of the puzzle to get the treasury department authority to lift the debt limit and congress the authority to overrule it, this is what she said to reporters weke must suggestions membersof have, one that really

classic endorsed a while back by mitch mcconnell but who knows? what is the responsibility on secretary of thes treasury to make the determination to lift the debt ceiling? that decision could be overruled byby the congress. it would take 60 votes under the custom but nonetheless, congress would have to overrule that.ld that seems to have some appeal to both sides of the aisle because of the consequences to people of not listening. many democrats and republicans voted againstd but but never to the extent of jeopardizing your.

>> you would favor the idea? >> i do think it has merit. >> on that proposal and other proposals you get around are you the debt limit. >> let me not comment on specificet proposals so i start try to steer clear of potential bills but i think their compromise that she's talking about makes sense. on the one hand, he authorized the treasury to take the steps needed to finance the government's deficit on the other hand we are getting political support for things needed, i think i i would need o be on support on both parties to be achieved on the replicants are by having fixes to the long-term policy of our nation. >> we have heard about ideas a trillion dollar coin invoking the 14th amendment without

endorsing for any specific proposal. you talk about those issues in general and wife they come up as a way to get around the debt limit here? >> one of the great things about americans creative people and some are lawyers. when we are faced with prices this they look at asked by congress, they take creative reading constitution to figure out a runaround. when i see as necessary but a hard thing to do is eat an actual compromise with congress. we see these thrown out there, it is completely for the rest of default on its debt. on this, i agree with secretary yellen and a whole range of

middle-of-the-road on this issue. >> george mason university, we are talking about debt limit, fomite are open to join the conversation. independence 202-7488 -- two. folks are calling it, u.s. national debt as of this moment is 28 trillion 870 billion $795 million and counting, how much is too much debt? >> that's an excellent question. let me try to put into terms that may be easier for the audience to understand. right now, federal debt in the public, u.s. treasury bonds that government issues and people like me and you, that's one 100% of gdp. there's a lot of debatepe including online but the debt

for gdp, a mortgage of say ten times your income, maybe pushing an upper bound worth an acceptable amount of debt in the same way our debt gets to one 100% of national income, that is pushing it quite a bit but the u.s. also, one of the most developed countries in the world, we have a phenomenal financial system to help us finance this large amount of debt so i don't mean to say that there's going to be a crisis but rather look at projective level of debt over time, that will grow out of control. even beyond projections who have seen in the past decade or three decades from others of time from the federal reserve worried there would be too few outstanding and wouldn't be able

to do the regular monetary policy act. after global financial crisis ander after all hopefully hearig the pandemic receptions there at one 100% of gdp) or more other liabilities not counted in that but are a backstop of the u.s. government to the financial system so i want to say whatever sustainable number is from hundreds of gdp from 110 gdp, 120% or even 150% gdp, eventually the maximum okay reached if we continue to grow debt. >> there's other libraries, can you touch on what they are where they are held? >> basic economics here are usually private debt u.s. government seems appropriate to guarantee.

examples here bank deposits, you invite give our dollars to the bank and pay give us checking account number is essentially an rethink of the checking account balance as being actual dollars but it's not really, we could go to the bank at any time and say we want our money and they have to give it to us now it's a fixed number we gave them. plus interest. during the great depression, u.s. congress president roosevelt decided it's important enough to backbite guarantee the u.s. government. ... these ran into significant

problems during the 2008 financial crisis. fannie mae, freddie mac there's an implicit understanding in the market that the government would stand in to back up the market that unfortunately made arguably explicit in the last 10 years. and there's a whole range of other ones as well but ultimately u.s. government sees some kind of private liability and they say this is to big to fail and we are going to backdrop it. those aren't the eshelman risk. >> host: a caller waiting to talk to you including william of personal line for democrats. good morning. >> caller: good morning, john. i think they politicians to keep

their hands out of the national debt. it's just a shame the way that it could be a great country but no, politicians do everything in the world to try to keep it -- john i'm 60 years old and i've always voted democrat except the one time i voted for a republican in my lifetime. all we have is crooks and that's obvious. and we are supposed to have a government? it's just a shame and i feel so posorry for my grandkids. >> host: william before you go who's the one republican you voted for in your lifetime? >> caller: nothing will ever become of it. john, thank you. i'm 86 years old thank you much

john. goodbye. >> host: christopher russo too much politics around the federal debt. >> guest: i really want to know what republican he voted for it. i really sympathize with him. but i hope the issue we are facing here is important enough that in the way he described it could be nonpartisan. i'm not here today to argue that we need to have necessarily a big government. we could have either and it's a choice that we as a country need to make. we can have a large or small and their pros and cons for both but what i do argue is an unsustainable rise in her debt is not sustainable whether you want to have a small or large government. >> host: sumpter south carolina, good morning. you are next. >> caller: good morning. thanks for taking my call.

i agree with the previous color in reference to politicians voting on the infrastructure bill for president obama trying to get a program together for improving our roads and bridges. the republicans were totally against it and when president -- the previous president trump was in office and he wanted to develop an infrastructure bill to improve our roads and bridges the republicans were all for now again they are against it under president biden's leadership of my personal concern would the two, if president biden would do something to reduce or eliminate these tariffs that were imposed upon us by the trump

administration because that increase was passed on to us as taxpayers and people that buy commodities on the market. those ghosts of blood on tariffs. >> guest: more generally part of the package is an affordable compromise fix the debt limit and also fix the debt. i think we should have structural reform as well as tariff reform as well. again a level of economic growth lift all boats particularly on the perspective of the debt so tariff reform would be great. i talked to the mercatus center a lot about the reform of our medical system. it would be great if we had more providers of medicine to lower costs for americans. it but there are laws in the book that prevent new hospitals from starting without the

approval of other hospitals in the state. there's aut gentleman that brout up how infrastructure is essential and i also wonder whether there are restraints right now on individuals and businesses that prevent them from investing themselves in infrastructure. for example zoning regulations which prevent homeowners from recruiting their property from building extensions in some cases and an accessible dwelling unit and a noninvasive way to raise the housing stock in the country and lower the cost of housing in united states would help many american families across the country. a lot of work needs to be done here by fixing the debt itself we might be able to generate the type of compromise that we get all that done. >> host: chris in new york city honor text messaging service. why don't you game out a default scenario saying if the debt

ceiling wasn't raised now or in a month would there be enough passer by to pay the interest on existing debtay since medicare d social security are already funded and what would the practical effect in how much daily revenue comes in and what's the total daily expenses that need to be covered? >> that's an excellent question. first let me address the fact that social security and medicare funded but it's what happens with social security as an example we have payroll taxes and be get a paycheck and not money is earmarked for social security. it's not earmarked like you would expect. not putting -- being put into a separate account. so it's ready for you and me when we retire. instead that social security revenues used to pay for anything and everything that the government spends money on whether it's war or whatever else you might not like the

government spending money on her like the government spending money on that's what it goes for. he goes into checking out account with everything else so the way it operates from a financial perspective is the treasury gives the trust fund an iou. he took out this much in taxes than we paid out the small amount of revenue and that's a consequence. we owe you this amount. social security in a sense is going to go bankrupt in the next decade or so as projected by the social security at administration the ceo and medicare will go bankrupt a few rsyears from now put these programs need to be fixed. so address the specific question will happen in the near term if the debt limit is not raised in treasury stops prioritizing payments? well it's hard to tell from reading the public document treasury would pay from the

existing national debt and it would use the remaining inflow of cash to pay whatever other obligations the u.s. government could. now there are whole suite of governmentar obligations of past several years there's talk about whether they should payments instead of paying everything. maybe treasury could just pay social security and medicare in the national defense and again we can conflate the numbers here but that scenario seems plausible for the time at least but i just don't know whether it's technologically possible for treasury to prioritize payments in that way. someone has knowledge of internal payment system used to run our financial system and let me just say i'm not confident that can be done. i don't know. this is not an easy system to

work with. >> host: speaking of federal reserve and switching gears a little bit explain what tapering is. >> guest: tapering is ending the asset purchase. the fed balance sheet has over doubled in size during the pandemic and its now at 8 $.5 billion upwards of $4 trillion before the pandemic and -- since the global financial crisis. these purchases provided a rapid recovery for the recession putting millions and millions of people back to work. tapering is the process of the feds using those purchases and bringing them down to zero. >> host: when they do that when the tapering happens what is the schedule here and how

much of that is changed by the whims of congress and by something like the debt ceiling issue that has now been punted for two months now? >> guest: let me defer you to the comments made by the fed officials but at a high level in october officials announced that they were considering the possibility of beginning the tapering process and that could occur as soon as november. they have an upcoming policy that announced that. of course the economic uncertainty about the debt limit is such that it might he punted. hard to say and chairman powell has always been clear that monetary policy is going to continue to react to changes in inflation the job market and other factors first financial stability like the debt limit in making their decisions so there

is no clear guidance about what they would begin the tapering process. the last survey of participants these are the banks that the new york fed operates with an market operations for example bonds and securities. those banks could take between a happier new year and it might begin with the next few months. >> host: d of an opinion on the right rate that the fed's should be at to respond to future crises? >> guest: i think when it comes to tapering the simpler? the better so if they want to get down too say zero asset purchases a month over the next saeb year simply take off the current run rate of asset purchases of $10 billion in reductions. i should note even when the fed stop for choosing assets this means the size of the balance sheet stoppedas growing in it doesn't mean it's being reduced

because there are maturing assets each month with mortgage-backed securities and if the past is any indication of what we do in the future it would take to make read up on two or three years in which they would hold the size of the balance sheet constant and methodically over time allow maturing securities to drain the size of the net elegy. >> host: christopher russo if you have questions about the federal reserve about the data in the debt limit now is the time to call in. with us for 2030 minutes. nelson is an hambrick pines florida, republican. good morning, go ahead. >> caller: good morning. i just like to point out sir that virtually all the civilizations have headed decline in the past that is one of their bases for their decline was their national debt starting with the romans when they lowered the amount of silver and

the british empire who had a national debt that preceded their gdp repair national debt already exceeds their gdp by quite a bit and it's growing at a rate of 21 and $2 million a minute, something like that. the only thing that gives us pause as to how much money we are spending is the debate on the debt limit to that causes us to stop and talk and be able to realize just what a quagmire we are putting ourselves in. the government has got to stop exceeding its ability to spend money. there aren't enough wealthy people in the universe to pay off the national debt.

the only way to start hitting back at this growing national debt is to grow the gdp and the way to do that is by what was done under donald trump when he had taxes lowered in corporations, jobs expanded and more money when back into the national treasury in the history of the country. so i just wanted toas point that out and i look forward to your comments. thank you sir. >> host: thank you nelson. >> guest: that was an excellent question. there were a few important things there. first i know two examples where we had the history of nations a country with over 100% of debt-to-gdp. the first was the united states following world war ii. that was the period inas which e had tremendous structural reform

as well as a --for the first decade after world war ii. doing monetary policy helps ther treasury finance its debt and not react to changes or inflation. so god willing we won't have a repeat of the 1940s like we had 10% and 20% inflation year-over-year. assuming we don't have that situation again how do we get ourselves out of this quagmire we find ourselves in? i will turn to my second example in the country that one of% of jett -- debt-to-gdp the united kingdom following the napoleonic wars with the tremendous military force. they were able to grow their way out of debt debt and the way the gentleman describes. of course they were following the industrial revolution at the beginning of a worldwide trend of positive growth like we have

never seen before so i'm not saying we need to second-guess the revolution and if it would be phenomenal if we had one. we need a way not to fix the debt limit which again is a self-inflicted wound but also way that we can raise the overall level of growth and also bringing down spending to be moreo commensurate with taxes. debt-to-gdp shouldn't be zero that nonetheless it doesn't help with taxes are higher than ever and particularly in the long-term certain programs that need to be fixed to bring the level of spending back on a stable path. >> host: montana, this is ken, good morning. >> caller: good morning. i'm 80 years old so i'm old oenough to remember eisenhower and his warning beware of the

military complex and i'm also old enough to remember how ronald reagan was the first one to really give us that quote trickle down theory and all of these things combined the spending on the military, the huge tax cuts between ronald reagan and all the republicans and the christmas gift that they gave to quote the taxpayer at the expense of our country. anybody and i'm not an economist but i think most people that run the household know you cannot cut your income and increase your spending and come out with more money in the end. i do not care how you quote increase the amount of people,

when you do not support the people at the bottom and in the people at the bottom and did not have money to spend we do not have an economy that is working. >> guest: i do sympathize with his concerns a lot. i was not alive during that administration but eisenhower was a great guy from what i know and speaking of the economics of the question i agree we need a system that works for all americans. we need a system that puts americans to work. again the fed is done a tremendous job in the past 18 months or so doing that in part by having a strong response in the pandemic and total income has put millions of people back to work. the gentleman used the phrase trickle down and that's a euphemism or derogatory term for

supply-side economics. i'm not a supply-sider. i must supply and demand economist and that means i don't support things like responses by the federal reserve and the scheduled downturn to promote a recovery but also the long-term recognized we need structural reform from congress to improve the long-run growth in our economy. the gentleman was alluding to something called the laffer curve. that's the idea that if taxes aare significantly high you reduce taxes it brings more revenue because it promotes morc economic activity congress will debate back and forth the validity of that tax level than in general reducing taxes would bring in -- bring in revenue. one pernicious one is among the poor jujuy have a special altercation to help but in many

cases what we have our benefit system structures and recipients over one of her scent of each dollar10 earned. they will lose more than a dollar for each dollar they earn arin wages. the way of modifying or system and help the people in our country while the same time not impose tax rates on it could be a way of helping poor people in labor force. those who you're talking about the poorest americans. the discussion on capitol hillot about inflation and especially its impact on the poor americans and republicans in particular concern about inflation during the biden administration but this is treasury secretary janet yellen late last month talking about the issue of the rights of inflation and here's what she said. >> i want you to tell me what you thought would be ind placet the end of this and you told me to present.

do you still stand by that prediction? >> clearly inflation this year is going to be above 2%. just the experience so far this year states that's clearly true but i think we are seeing monthly inflation rate taper off. >> would the think it will be at the end of the year if not 2%? >> rob publicly closer to 4% and that is the case based on what has happened this year. >> host: mr. russo on inflation concerns. >> ini sympathize with the americans were concernedfl about inflation. i'm alsoi concerned. i think i try to use the

perspective of someonene who gives -- there's upside risk and downside risks so that downside risk is the possibility that tightening policy raising interest rates too quickly that would take us back down into a double-dip recession and that would be harmful for the job market. even if not taking us into recession monetary support could lead to a --and the global financial crisis. on the upside if we keep the jewish rates too low for too long for taxes too high for too long we could have inflation began to spiral higher and higher. now the balance of risks in elastic at her so the last year or two in my view has been tilted towards the downside. it's the first outcome of week job recovery but as time is gone on and we have g seen a recovery

to rates are much more balanced. the questions we have asked herself as economist and i think what the fed is considering is whether the inflation we are seeing today is that driven by monetary policy or is that driven by the supply-chain disruptions we are seeing? it iss driven by the monetary policy we are are seeing 4% and inflation year for year that would be the cause to reduce the level for bringing inflation back down closer to the target but in my view and the view of many economists high inflation we are seeing today is due to supply-chainin disruptions. temporary dysfunctions an economy that will be resolved over time and if we react to those supply-chain disruptions as though they were over -- that would compound the situation and itun would become worse. the conventional wisdom and monetary in monetary policyu is

if you have the supply-chain disruption don't take monetary policies. allow for inflation to fall back over time as the disruptions. >> host: long beach mississippi this is john good morning. >> caller: good morning. my question is very simple. first i would like to know if it's possible to put a cap on deeper selling -- deeper salaries. people take jobs on working for us and they deserve a salary but they should realize that enough is enough or we could put a 10% tax on everybody regardless of their income or we could make the rich start paying their share share of taxes because they don't paid taxes at all. that's my question.

>> guest: there's a lot of interesting stuff there but i don't know if i can comment on all three but i'll just say we think about structural reform and fixing the structure of the texas system taxing people especially the worst off among us have extra early extraordinarily high rate there's a lot of debate about what the actual numbers are too should the capitol gains tax beats 20% 30% or even 0%? my suggestion here is that we should figure out what the right structure for tax structure so figure out what we want to be spending money on and based on what would be necessary to raise the necessary revenue. there's a lot we can do to fix the tax system without even changing the distribution of who pays taxes and a political

compromise requires that raising taxes on certain individuals in that aspect of the american people we can do that again while also making the tax system more compatible wishes this fancy way of saying compatible with people who want to go out there and work hard instead of being penalized by the government. >> host: last question from gary c a republican, good morni. >> caller: good morning gentlemen. mr. russo i want to add to your social security comments about leaving ious. when lbj was president he saw how much money was coming into the treasury at that time and saw an c actually social securiy and medicare money. althat included the general fund so if you took his era's president to this day social security and medicare would be

at $108 trillion. that money went towards and your absolute correct i don't think many people realize that but here they want to spend so much money and we are at 28 trillion now and nobody even thinks about putting money back into social security. in five years it's going to run out and by 2030 social security will be pretty well completed. my whole thing is i understand if everyone in washington thinks money grows on trees which it does not and the debt ceiling wants to be eliminated if interest rates went up and the fed raised interest rates we couldn't even handle that on 28 or $35 trillion. it would be everything in the government and that's all i

wanted tont add. >> host: mr. russo. guess who i appreciate the callers comments. he's absolutely right when we have those taxes pay for those programs we pulled the treasury general account that's a a checking account the treasury holds at the new york fed and we jeff: payments. i was in charge are forecasting that on a daily basis for treasury officials. if we could put on a more solid footing going forward if we could do that for the next few years but i hope we'll find the political will in washington dude do it. people at home who have those used the solution to our nation's fiscal problem is did not come from the two-year

fight. in which we -- that led to the eroding of our credit rating and if we were to have a self-inflicted wound if we push ourselves to a financial crisis in a recession that would be terrible for fiscal outlook. again i try to emphasize these arees fundamentally important issues that we need to fix and also the national debt which is driven primarily by mandatory increases in certain kinds of spending every year so if we could fix these w things togethr that's a win-win that maybe even 2021 congress can get behind. >> host: in alabama this is rob, good morning. >> caller: good morning.

i have a couple of little things that i've noticed on your program. one was the statement that social security would be bankrupt in 10 years. social security has been bankrupt since the johnson administration. all the money was taken from the trust fund and put into the general fund and has been used mostly for social programs. lbj did this to show he could fund the great society and they said they were borrowing the money from the social security trust fund. they were not borrowing anything. when you take it without any intention of paying it back ever and continue to take it that's stealing. the secondco thing is on both sides republican and democrat when a politician tells you that if we don't raise the debt ceiling and both sides have done it, put out raise the debt ceiling we will default.

that's a lie. we have enough money coming in to service the debt. it has to be serviced first before anything is taken up until we stop servicing the debt we don't default and that's not true. >> host: mr. russo let you jump in. >> guest: i really understand the callers pack on this issue. as the gentleman says it could be possible that treasury of prior tases existing principle and interest on the national debt with incoming revenue but that said the governments other out -- obligations spending mandated beyond social security and medicare and the whole friday of other things that we don't have enough money coming in to pay so then the question for me is theio economist is how

does the worldview of circumstance in which the congress of it operates these programs whether you like them or you don't like them and treasury has to be bound by a debt limit to present prevented from making the payment that is obligated to make by the congress. i don't think the broader u.s. economy would do that and again the notion of prioritizing payments i'm not a lawyer and they can't speak to what is legal or not legal for what treasury could or could not do but it's not clear to me that that's a bulletproof response or solution. let when we get into the weeds about this in a hypothetical situation treasure would have these extraordinary measures by extraordinary measures meaning to things we do before we hit the debt limit and they are the

things that just describes what to do prior to his payment. we get to that position with the intervening financial market as ta result of that it's not cler to me that we are in a good situation. i do also get the gentleman's point about the political reality we are living in. you wonderre if we got into that situation would congress be willing to pay all thehe nationl debt or her with there be a bondholder on the world in china say or congress might not want treasure to make that payment. it's a terrible idea but we are taking a gamble here in many connections by going beyond the -- and in my view it's too dangerous. >> host: we are a bit past their time but there couple of callers that have been waiting a while to chat with you if you don't mind we will get them in.

this is rick and acheson. good morning. >> caller: good morning. this is just a follow-up to a statementyo you made about sosa should care deante medicare possibly going bankrupt in the future and so on. howeverr fixing one is much easier than fixing the other one. you said there were fixes for both of them and you just talked about the fixes that you see for both of them that we have cleared up. >> guest: i appreciate the gentleman's question let me just be honest what we are talking about social security and medicare it's not my expertise but on the level it should be pretty easy for most americans understand social security for example people have been living

longer since the program is founded and they are drawing and larger benefits over time. so if the benefits of social security are increasing over time and tax revenues are up you could try to scale benefits back and it's not going to leave anybody impoverished. it will bring the levels of benefits down. staddition to that you could rae payroll taxes or social security not just for payroll taxes but through other taxes for treasury. medicare is the gentleman is alluding to is more difficult because the medical spending over time is large and a friend of mine said that these trends continue we'll have 100% of gdp being >> onn medical care and it will

not be extrapolated over time let's hope that the cost of medical spending needs to be right down to put medicare in a more sustainable path. you could possibly raise taxes sufficiently high. the question becomes nyp the morgue difficult question is the caller is alluding to my colleagues at the getty center done a lot of work on this. on the whole i think in my view and in their view it would involve having a more competitive system forpe providg medical care and to bring down the cost of everything else you spend money on and the cost of medicine as well. let's call jane from san diego a republican good morning. sin good morning mr. russo. two calls to go you made an incorrect statement. number one politicians are the ones that cause the death of president the senate and the

house of representatives and the congress make the debt and we all have to live with it. never two on what payments are going to be made by the federal government as we approach how much money we are going to take an anti-much money we are going to spend out. so please answer those two questions. you can answer yes or no to either one of them. >> i'm not sure i caught the second question but of course the my emphasis on congress is the fact that under our hopefully congress has the power the person the power to credit cards of course it wouldss likely require the president to veto in a broad

compromise. there are political issues that need to be worked out by legislator on capitol hill by the high level some sort of compromise rightly would be necessary. on the second question i apologize for not sure i understood it. let's go we are 10 minutes over segment and we do appreciate you sticking around for a few extra calls that will have you on again down the road heard christopher russo at mercatus center predicting follow him @rousseau econ. thank you for the time. >> guest: thank you so much for having me. the

white house covid-19 virtual briefing. this is about early minutes. >> thank you for joining us.