. .

and they are carrying out attacks in other places. fortunately, there were not many americans in the mall at the time, but it shows that a group like al-shabaab, and there are other al qaeda affiliates and other places, are still intent on carrying out terrorist attacks. that is what we happen to call a soft target was not well defended. our embassies around the world, as well as our country at home, remain at risk of attack. if there were to be an attack later on, whether it is on the scale of 9/11 or something much less, the american people would then be saying "why didn't you do anything and everything you could to keep the country safe?"

host: twentynine palms in california -- tammy, you are on with john bellinger. caller: good morning could i want to say thank you to the national security for all the work that they do. my husband works for the department of defense, and i realize how important national security is. it does keep us out of war. i hear people say that we need to get out of war and all the stuff but national security is a big part of that. i want to know why there is not program set up for the national security, an important agency like the department of defense and things like that, so that when there is a shutdown of the government, those agencies still continue to be able to do their jobs and take care of the business of the security of the nation.

host: before you go, was her husband furloughed? caller: yes. he went back on monday because they determined that his job was absolutely imperative an important. my husband works with the readiness and training programs, and he prepares all the weapons. host: john bellinger, if you want to talk about the planning for the shutdown. guest: tammy, thanks for your call. as somebody who spent much of my career in the government handling national security issues, i hope that the families of those employees in all of these different agencies will in fact make their views known. i know it causes a terrible impact on them personally. if they are declared nonessential, that hurts morale, and even if they come back and

are not being paid, and i suspect it is not clear to you or your husband whether you will be paid on time, we have hundreds of thousands of workers in these agencies who are keeping the rest of the country safe, performing vital services. perhaps there are others in other parts of the country who are not fully aware of the sacrifices and the work that is being done by the intelligence and defense professionals all across the country. just to give one example, the fbi, which we value as an important agency on the frontline of detecting terrorist threats, is unable to train new agents. they have virtually shut down their training academy at quantico. just this past week they brought in law enforcement professionals from other countries to train them.

those people are ready to train at the fbi in quantico and they have been sent back. they were brought to washington and economy was closed down, and those people left and sent home. host: with 350 employees at the department of defense being furloughed, and the 350,000 being furloughed and then call back, and the cia calling back a lot of employees this week, could agencies have been better at planning for the shutdown? guest: i have talked to people in these agencies -- the leaders of these agencies expected the shutdown was going to be a few days, and as with a holiday period over christmas, the agencies can get by for a few days, but as they began to realize -- the secretary of defense -- the shutdown could go on for weeks, this is causing

serious damage to our national security, putting the country at risk. bringing back almost all of those employees and whether they will get paid later on or when they will get paid is another issue. but i think the heads of these agencies just can't get by having so many people furloughed, so they just brought them back in and made the decision that we are going to declare them to be essential whether they get paid or not. host: rachel is up next from texas on our line for independents. caller: yes, in the constitution, article one, section six, we are to pay wages of representatives -- i'm sorry, i'm nervous -- we pay their wages. it has nothing in there about us paying for the insurance. ok? how many representatives are taking the free government

insurance that we pay for or are they paying out of their own dam pockets? host: members of congress? caller: yes, we pay for their insurance. and then to take checks away from young men that died out there -- they are heartless people we have in government. they are tied to companies. they don't give a damn about us. they are looking out for the insurance companies and the pharmaceutical companies and who puts money in their pockets for their campaigns. host: rachel from texas. chris from new jersey on our line for republicans. good morning. caller: hi, good morning. i'm calling because i'm very curious to know, mr. bellinger, you stated that you were -- you

participated during the 9/11, i keep mentioning the word "terrorist." with the state of the country is in, you see the emotion of the last caller, i think a lot of americans feel that emotion. i think a lot of us are at this point -- why do you continue to say the word "terrorist"? why do you continue to allow subjects and conversations when we need to be productive, like the last caller just said? people have died, our soldiers have died. coming home, and we have nothing to give them. yet money is being directed to other things. why can't the people that have the ability to make these decisions keep in mind that these are people's lives? please do not continue to say the word "terrorist."

guest: i'm not quite sure what you mean about whether -- whether you are questioning whether terrorism actually still exists. certainly i think that all of our nation's leaders, on the republican or democratic side, recognize that the country remains under threat of attack from members of al qaeda or affiliated groups, just as we were attacked on 9/11, that our embassies were attacked in africa, and that there remains a very serious threat of terrorism. there's nothing else to call it. these are extremists from different groups, either al qaeda itself or affiliates of al qaeda in different countries. they dislike the united states and want to attack us and kill our people, whether it is here in the united states or around the world. it is certainly unfortunate --

when i began to serve in the white house in february 2001, we were a country that seem to be at peace. after 9/11, we realized we were being attacked all around the world. we have done over the last 12 years between two administrations a tremendous amount to try to decimate the leadership of al qaeda. we hope that we can say that that threat is over. i am not aware of anybody suggests that there doesn't remain a threat from terrorism here and abroad. sadly. >> on the next "washington journal, the latest on the government shutdown. will stay with representative leonard lance from new jersey.

we'll be joined by california democratic representative george miller. "washington journal" is live on c-span every day at 7:00 a.m. eastern. council'sily research values voter summit begins this morning. you can see that live on c-span3 at 9:00 a.m. eastern. treasury secretary jack lew says that if the debt ceiling is reached, there is no way for the government to pick and choose which financial obligations to pay. he also says the government it difficultmade to predict how much revenue the

government will have to pay for things like social security and interest on the debt. this is a little less than two hours. >> i call this hearing to order. on january 20 7, 1838, the young state legislator abraham lincoln spoke in springfield, illinois. america was a divided nation. he warned that the greatest threats to the young democracy or internal. ever reachesanger us, it must spring from amongst us. it cannot come from abroad. if destruction be our lot, we must ourselves be its author and finisher.

we must live through all time or die by suicide." the actions of the past few a smallhe extremism of core of members in the house have crippled the nation. for more than 200 years, the u.s. has been true to its word and honored its obligations from a paid its debts. today, a strip -- a small group of hardliners is using our economy as a bargaining chip to repeal the affordable care act. we are not going to let that happen. the affordable care act is not going to be dismantled in this budget fight. the issue is not up for debate. committee wrote the affordable care act. i am always open to this committee working together to strengthen the law to better serve the american people. said, we cannot negotiate under the threat of

default on the nation's bills. before any debate, any deliberation, we need to reopen the government and pay the nation bills, no strings attached. then, we need to work together, return to regular order, address the nation's long-term budget challenges, including entitlement and tax reform. now, we need to prevent another self-inflicted wound to the economy. that is what he faulting on the debt is, a self-inflicted wound with global consequences. deadline is fast approaching. in seven days, the u.s. treasury will have exhausted all extraordinary measures to stay under the debt limit. the u.s. will be at the risk of defaulting on payments. the united states, the richest, most powerful nation in the world, will be forced to look for loose change in hte -- in

the sofa to pay bills. while the shutdown has been disruptive, a default would be a financial heart attack. it would have widespread, long- term economic consequent is. the national markets are already showing stress. the dow has dropped 800 points in last three weeks. one month treasury bill rate has risen to its highest level since the 2008 fiscal crisis. if the debt ceiling is reached, the government would have to slash federal spending by 20% to 30%, driving the nation back into recession. the paint would be felt across every sector of society. medicare,urity, funding for highways, every government program would be devastated by cuts. families would feel it firsthand, with dramatic problems to retirement savings, jobs would be lost, home values

would plunge, interest rates on mortgages and student loans would soar. some have said we can't avoid default by prioritizing payments. default. avoid this would force treasury to pick and choose which programs forcing vital programs like social security, medicare, to compete for funding. this idea is irrational. a default would have a catastrophic impact on the global economy, as well. president of the world bank warned that the default would have consequence is for the world economy. christine lagarde, imaging director of the imf, said it is "mission critical" to resolve the debt limit as soon as possible. this is serious. the whole world is watching. our actions here in the next couple of days will have global

applications. -- implications. we are the most important economy in the world. the dollar is the worlds reserve currency. our treasury bonds are the backbone of international financial system. a default look at the global economy in chaos. of that, there is no doubt. last week, the treasury warned us that a default would cause a "recession that could echo the events of 2008 or worse." have people forgotten what happened in 2008? the collapse of lehman brothers set off a financial earthquake. markets plunged, on a planet surged,-- unemployment market confidence was shattered. it upended lives across the country, the aftermath can still be felt today. we cannot let that happen. we have a responsibility to avoid another economic disaster. our leadership, our resolve,

will be tested in the next couple days. havef us in this room, we an opportunity to pull america back from the brink. i introducedweek, a bill with leader reid that would get us past the stalemate. it extends the nations borrowing authority to the end of 2014, past midterm elections. it is a clean increase without amendments, allowing the u.s. to pay its bills and avoiding the district -- the default. this short term solution will pull us back from the edge and allow us to posit take a deep breath. take a deep breath. i have been in the senate for close to 35 years, and congress, going on 39. i have seen partisan fights. but never in my mind have i seen washington so angry, so gridlock, so broken. it does not have to be that way.

i know the public might find it hard to believe, but there are some reasonable people in congress. there are many who want to do what is right. there are many who want to work together to conduct the business of our nation. i say to them, all my colleagues, now is the time. now is the time for congress to old battles.ng now is the time to come together and do what is right for our nation. now is the time to come together and reopen the government and fiscal america's financial locations. fulfill america's financial loo -- obligations. lincoln once said "i am a firm believer in the people. if given the truth, they can be depended upon to meet any national crisis." that is why we are here today. we need to give the american people the truth.

only then, when everyone understands the real crisis at hand, the facts and the truth, we will be able to meet the crisis. >> thank you, mr. chairman. i want to thank you for holding today's hearing on the debt limit. i went to welcome you, secretary lou, we appreciate your time. -- secretary lew. during debate over the debt thenng increase in 2006, senator obama stated that the fact that we are here today is a sign of leadership failure. leadership, he said "means that the buck stops here. instead, washington is shifting of ourden onto the backs children. america has a debt problem and a failure of leadership. americans deserve better." day, our lew, on that

gross debt was $8.3 trillion. it is now more than twice that, $16.7 trillion. that represents 107% of the size of our economy. as the congressional budget office has made clear, this poses a large economic and fiscal risk. 2006 debate,ame then senator biden said "why vote against the debt limit increase, you cannot change the fact that we have incurred this debt already and will no doubt incur more. it is a statement that i refuse to be associated with, the policies have brought us to this point." what a difference in attitude there has been. obama and vice president biden preside over an administration that tells us that raising the debt limit, in secretary little,

"allows us to pay our bills." lew you have stated that only congress has the ability to increase if the president does not agree. despite your public statements to the contrary, it is not true that raising the debt limit has only to do with spending congress has already approved. this argument is based on a makese that congress spending decisions unilaterally and that the executive branch plays no role in the process. that is sadly false. no amount of spending can be enacted without the president signing it into law. budgets have not been well received, even by democrats, he has traditionally been deeply involved in congress' efforts to set

spending priorities. the administration also issued statements of administration policies and veto threats on spending bills and other pieces of legislation. workresident -- presidents with congress all the time to enact agendas. we remember how president obama unveiled and pushed his trillion dollar stimulus through a democratic congress. president hashis made unilateral decisions with no input from congress that have had an impact on federal spending. for example, the decision to delay the employer mandate under obamacare with -- which cbo tells us will cost an additional $12 billion to our deficit. congress never voted on the delay. it was a unilateral choice made at the treasury department. thatort, the notion questions surrounding spending is congress' to answer, that

a case of false advertising on the part of the obama administration. instances been other of false advertising concerning the debt limit. one is the president's claim that non-budget items have never before been attached to the debt limit. a claim to which a fact checker at the washington post assigned for pinocchio's. the 53 debt limit increase is passed since 1978, under both republican and only 26ic presidents, were "clean." , for the first time in recent history, people were commenting on the inability of treasury to make timely payments. if you go back to president clinton's administration and rate some press conference is -- thenthen checkers

treasury secretary rubin, this is also false. i asked permission to enter a press conference that supports this position, along with an associated article from "the new york times." i hope that during today's hearings we did not regress into recollections of history. the issue that we face is marred debt limit increase. there have been seven -- another debt limit increase. there have been seven cents the president came into office. raising the limit to the current amount. they can increase of $5.4 trillion. when talking about future increases, all the administration will say is that increase andclean"

that they refuse to negotiate. we do not know what they mean by increase. we don't even know how much of an increase they want. desires knownch would be a negotiation. it is neither productive or helpful to resolving the impasse. what the administration appeals to be saying -- appears to be saying is that it is up to congress to increase the debt limit and to decide how much and for how long. this raises more questions than answers. does that mean that if congress chooses to enact a two week clean debt limit increase, the president will sign it? according to public statements, because congress is solely responsible, such a hypothetical stopgap would be fine if that is what congress chooses to do. i do not think that is what the president is looking for. couple of days, the

president has expressed willingness to entertain a short-term increase in the limit, which sounds like a terms.ness to negotiate the president's statements are still short on details. the lack ofw, engagement on the part of the administration is one of the elements of the debate that i find disconcerting. it is also disconcerting to have administration officials, including you, publicly questioning sentiments of americans and financial record participants and suggested that people maybe to call him -- may be too calm. it is disconcerting that you have suggested that payments of social security benefits to retirees and disabled workers are at risk, especially because you are a trustee of the social security trust funds. administration officials are tonding alarms of a risk financial stability surrounding development.

while at the same time, the financial stability oversight council, which you chair, has been silent. a refuses to tell people how would respond to these. to administration refuses have a conversation with anyone concerning our unsustainable entitlement programs, which everyone agrees are the main drivers of our debt. refused tont has seriously discuss structural entitlement reforms without assurance that he first gets another tax hike. more often than not, what we a seriesntitlements is of disclaimers as to what reform proposals they will no longer consider. that list seems to get larger everyday. the biggest question i have is, it is the obama administration will not negotiate on the entitlements in the context of the debt limit, when will they negotiate on that -- on entitlements?

i have put forth five, modest, bipartisan reform proposals and personally gave them to the president earlier this year. of thesecopies proposals yourself. to this day, i have yet to hear a response. i cannot even get conversations from the administration about my proposals that i offered in good faith, well before the debt limit was an issue. most recently, the senate majority leader has introduced a "clean" debt limit bill that would increase the debt limit until january 1, 2015, raising the limit by 1.3 trillion dollars or more. that apparently is the position of the senate democratic leadership but it is inconsistent with the president's willingness to accept a short term increase. my hope is that during the

course of this hearing, we can get a real sense of where the administration wants to go with regard to the debt limit. thepe we can get past arguments that have dominated the administration's rhetoric regarding this issue. larger,ons debt is now as a share of our economy, than any time since the spike up in world war ii. despite the rhetoric of the administration, our growing debt is not the result of decisions made by congress. it is not all due to the financial crisis. and it is not all the result of tax relief enacted under the bush administration. us,s a problem that all of both congress and the executive branch, need to deal with. the only way to deal with it is to confront our unsustainable entitlement spending, which will require the administration to do something it is refusing to do, negotiate. as president, americans in 2006,

deserve better. i appreciate you holding this hearing. >> thank you. before the secretary of the treasury begins, i would like to remind members that we have to be very efficient with our questions and our answers. the secretary has an engagement a couple minutes after 9:30. sorge us to respect others that we all have a chance. thank you, mr. chairman. i appreciate the opportunity to appear here and i appreciate the invitation to discuss the potential impacts of a failure of congress to increase the debt limit. congress has an important choice to make. congress alone has the power to act to make sure that the full faith and credit of the u.s. is

never called into credit. no congress in 224 years has allowed our country to default. it is my hope that this congress will not be the first. among the risks that we control, the biggest threat to sustained growth in our economy is recurrence of manufactured crises in washington and self- inflicted wounds. today we face a manufactured local crisis that is beginning to deliver an unnecessary blow to our economy. right at the time when our american people have fought back from the worst recession since the great depression. in addition to the economic cost of the shutdown, the uncertainty around raising the debt limit is beginning to stress financial markets. at our auction of four week treasury bills, the interest tripled, reaching the highest level since 2008. expected volatility

in the stock market have risen to the highest levels of the year. the only way to avoid inflicting further damage to our economy is for congress to act. i know from my conversations with a wide range of business leaders representing industries from retail to manufacturing and banking, this is a paramount concern for them. for is why it is important congress to reopen the government, to raise the debt ceiling, and to work with the president to address fiscal challenges in a balanced fashion. republican and democratic presidents have understood the importance of protecting our most important assets, the full faith and credit of the u.s. president reagan writ to congress in 1983 "this country now possesses the strongest credit in the world. the full consequences of a default or even a serious prospect of default by the u.s. are impossible to predict and often to contemplate.

denigration of the full faith and credit of the u.s. would have substantial effects on the financial markets and on the value of the dollar." if congress fails to meet its responsibility, it could deeply damage financial markets, the ongoing economic recovery, and the jobs and savings of millions of americans. i have a responsibility to be transparent with congress and the american people about these risks. i think it would be a grave mistake if -- to discount them. reasons, i have urged congress to take action immediately so we can honor all of our countries past commitments. department has regularly updated congress for the last five months as new information has become available about when we wet exhaust our extraordinary measures. in addition, the treasury has provided information about when -- our cash balances.

i have consistently provided updates and given congress the best information about the urgency to act. i met with the full membership of this committee last month to discuss this. the treasury continues to predict that the extraordinary measures will be exhausted no later than october 17. at which point, the federal government will have run out of borrowing authority. at that point, we've will be left to meet our country past commitments with only cash on hand and incoming revenues, pacing -- placing us in a dangerous position. if we have insufficient cash on hand, it would be impossible to meet all obligations, including social security and medicare benefits, payment to military and veterans, and contacts with -- contracts with suppliers. at the same time, we are relying on investors from all over the world to hold u.s. bonds.

over 100k, we rolled billion dollars in u.s. bills. if u.s. bondholders decided that they wanted to be repaid rather than continuing to roll over their investments, we could unexpectedly dissipate our cash balance. timee be clear, trying to a debt limit increase to the last minute to be dangerous. if congress does not act in the u.s. suddenly cannot pay bills, the repercussions would be serious. raising the debt limit as congress' responsibility because setress has the power to the maximum amount of government can borrow to meet its financial obligations. some in congress have suggested that raising the debt limit should be paired with spending cuts and reforms. i have noted that the debt limit has nothing to do with new spending. it has to do with spending that congress has already approved and bills that have been incurred. failing to raise the debt limit would not make these bills disappear. the president remains willing to negotiate over the future butctions of fiscal policy,

he will not negotiate over whether the u.s. should pay bills. the house ands of senate also believe it is possible to protect our economy by paying only the interest on our debts. while stopping or delaying payments on other commitments. how can the u.s. choose whether to set -- seven social security checks or pay benefits to veterans? choosing whether to provide food assistance or meeting obligations to medicare providers. the u.s. should not be put in this position. there is no way of knowing the irrevocable damage such an approach would have on our economy and financial markets. leaders have a responsibility to make our economy stronger, not to create manufactured crises and inflict damage. president reagan in 1987 delivered a message applicable to us today. "this brinksmanship threatens the holders of government bonds

and those who rely on benefits. interest rates would skyrocket, and stability would occur, and the federal deficit would soar. a specialas responsibility to itself in the world to meet its obligations. the very last thing the economy needs is a fight over whether we raise the debt ceiling. prices --we face challenges that require our full attention. and not when we know the damage a crisis can cost -- can cause. i look forward to answering questions. >> i would like to focus on a concept that some suggest is the way out of this problem. and which some suggest is feasible. which i disagree with, prioritization. what decisions you would have to make as treasury secretary, assuming interest was paid on the debt.

if you then had to choose which to beobligations had paid. i know you cannot tell us which ones, nor should you, social security, medicare, military, what not. if you could go through the actual legal and administrative problems and consequences would be. include how much total that would be. my understanding it is about 70% to 80% of those programs could be paid. also, what effect it would have on the gdp. walk us through prioritization. let me start by saying what i think should be obvious. if we do not have enough cash to pay our bills, we will be failing to meet obligations. under any scenario, we will be defaulting on obligations.

there is no plan, other than raising the debt limit, that permits us to meet all obligations. when questions are raised about prioritization, the first question is interest and principal on the debt. what else? regardingissues even interest and printable on the debt, r, given. principal on the debt is not something we pay out of cash flow. it is a function of the markets rolling over. there is a question of what we can do as a government how the markets function when the government is failing to pay its bills. we have never been there, anyone who suggests that they know what that means would be projecting. after 244 years of paying all of our bills, what happens when we stop? you couldnow how choose between social security and veterans benefits, between medicare and food assistance.

there is our obligations we have made. have the money to pay our troops in full, our benefits in full. our systems were not designed to not pay our bills. legal issues are many. i do not know how you could make the decisions, i do not think the legal authorities are clear at all. i do not think the administrative process with -- would permit the system to work. we write 80 million checks a month, the systems are automated to pay. we paid ours, bills. you cannot go into those systems and easily make them pay some things and not other things. they weredid nash -- not designed that way. prioritize, itto is my understanding that to some degree what your obligations

example, the big social security payment due. to.r medicare, other bills --d ue. itenue is a little sketchy, comes in an unanticipated amounts. >> that is very much the case. we have estimates. if these estimates are wrong, there is a risk of miscalculation. even in the period of time that i have been keeping congress informed, we have seen swings of $20 billion in terms of our estimate of what cash on hand would be. that is not because anyone did anything wrong, it is because quarterly tax receipts were not where they were estimated to be. i would remind everyone that we are in an unusual position with the shutdown. that is having economic consequences that we are just

beginning to understand. all the revenue projections that we base our analysis on were based on a world where the government was functioning and all services that relate to government activity were happening. it did not take into account -- account any layoffs, reduction in payroll. i have to assume that the estimates from before the shutdown are likely not to be accurate. >> how do you reprogram computers? >> mr. chairman, i do not believe there is a way to pick and choose on a broad basis. this system was not designed to be turned off selectively. anyone who thinks it can be done just does not know the architecture of our multiple payment system. they were designed properly to pay our bills, not to not pay our bills. >> prioritization does not work? >> i think prioritization is

default by another name. it is saying that we will default on some subset of our obligations. by definition, if we do not have enough money to pay all bills, we will be in default. >> thank you. to beretary lew, i want clear about the administration's position on the debt limit. the position is that the president will only accept a clean debt limit hike with no other company policy -- accompanying policy attached. i have asked you repeatedly, how much of a debt limit increase you would like and for how long. you have responded that it is up to congress. i believe that the administration's position is unfortunate. it is clear that we have a debt problem and that the fundamental driver of our debt is unreasonable ending in our entitlement programs. i believe we can and should use this as an opportunity to address these. i have personally offered five modest, bipartisan proposals on

entitlement reform to the president earlier this year. you have received copies. i have heard no responses to that. i did that, nevertheless the administration is entitled to its positions. i want to be clear concerning the debt limit. as long as there is nothing attached to a debt limit increase, the administration will say nothing more about it, including how much of an increase and for how long. is my understanding correct? or do you wish to give me your preferences about how much of an increase you would like and for how long you would like it. so that we can begin discussions on this. this a i have discussed number of times. discussedand i have this a number of times. i wrote to you just last week -- this economy

would benefit from more certainty unless brinkmanship. the longer the period of time is, the better for the economy. it is congress' decision of how often it was to vote on the debt limit. i believe that more certainty is better. i think that the senate leader and the chairman have put forward a proposal -- >> how much do you want, how long? those are two simple questions. the question of how long is -- i think i am answering as clearly as i can, the longest that congress is prepared to extend it for is the best. the president tried to be clear in his statements in recent days that if congress passes something shorter, he was hoping -- he is not looking for a crisis. congress will be right back dealing with that. the better solution is to go longer. we have tried to be clear.

everyone knows the numbers associated with different. of time.ent periods >> it is not clear to me. the cbo makes a number of things clear. between 2009 and 2012, the government recorded the largest deficit since 1946, causing that to soar -- debt to soar. 107% ofbt now stands at our gdp. a is turning to bring us to -- threatening to bring us to a crisis. the root of our problem is the government's health care programs, not just of him medicaid and medicare. securityds in social -- faceosten exhaustion. all i hear from the administration is that

negotiations can only proceed if , first, the president is guaranteed another tax hike. the only -- or if the only spending restraint we have enacted is turned off. when it comes to discussing solutions to entitlement hear is that i negotiations can only proceed if we pass a clean continuing resolution and a clean debt limit increase. take, beyond a guarantee to the president and congressional democrats, that they first get another tax hike or that the sequester be undone? the administration to talk about entitlement reforms, it has been met with silence. is it reasonable to say that there can be no negotiations unless there is another tax hike, when we know that disabled american workers face a benefit cut of one percent or more under current law when the disability

trust fund is exhausted in 2016 or earlier. -- 20% or more. >> i think the president has negotiated and remains ancient to negotiate. it is not clear to me. >> he has been on the verge of agreements twice until it was not acceptable to republicans in congress. he was ready to have an agreement twice. and at the end of last year. in his budget, he put policies that many democrats find challenging, because he wanted to make clear he was looking for a balanced approach to entitlement reform and tax reform to sell our fiscal matters in a sensible way for the medium and long-term. i think the president's record is clear. i would make one comment very trajectory of our deficit. when the president took office

were in the009, we middle of two wars and the worst recession since the great depression with a deficit that was nine percent of our economy. we have cut that in half. it is not fair to say that we are in the same place we were. >> thank you, mr. chairman. mr. lew, it seems to me that in the event of a default or new default, theear dominoes are going to fall fast and hard. those hit early on will be older people who depend on retirement savings. these are the older people who saw much of their life savings evaporate during the recession. they are struggling just to get those private savings back to the water line. the as specific as you can with respect to what default or near default would mean for those seniors who decide on a private savings.

wyden, i can only begin to imagine what it would mean to a retired american who asies on social security their major source of income if we had to tell them the check was going to be late. my late mother lived on her social security check, many of us have relatives. if the check did not come, if they did not have the ability to call someone to help them out, they would be in trouble. anyone who thinks that anything short of default has never experienced what it means to live on social security. i share your view about those others. i think the public has heard, you have given some comments with respect to mortgages. i am concerned with retirees and their private savings. --retirees saw their private let's talk not just about

retirees, workers have their savings at stake. the effect is the same, it is just more immediate for retirees. financialing the crisis, people's retirement assets fell dramatically in value. it reduced what retirees had to live on, it caused anxiety amongst working people about how they would catch up. we are in a place where, because of the resilience of the american people, the recovery in the economy, the good policy decisions made by congress and the federal reserve board, we are in a better place. we have a lot of work to do, we can see from the economy that people are beginning to feel that the economy is moving in the right direction. if you create a crisis that causes assets to shrink in value for retirees, they do not have time to catch up. even if it rights itself over a period of time, the retirees are in a bad spot. it is very unfair to have

manufactured crises that have a on workingmpact americans and retirees who ought to be able to worry about market risks, not government policy risks. >> let me ask you about the effect of default on the deficit. budget sequestration has not been an ideal instrument, not perfectly targeting for driving on the part -- the budget deficit. it has produced savings that accrue to the benefit of the american taxpayer. in the event of a default or near default, is it fair to say that some of those budget savings would be eaten up to pay higher interest costs, a substantially amounts of which would go to foreign governments and foreign creditors. week have suggested this that for the bills that mature rates end of october, the

have almost tripled over the last week. have access to the credit markets, but it is more expensive. for no reason. it could be resolved by just settling this issue and making it clear that the debt limit will not be breached and we won't have any problems. what is troubling to me is that after the american taxpayer has gone through a painful process and you see these savings -- the results of a default would produce higher interest payments and transfer american wealth from our taxpayers to foreign creditors. higheruld add that interest rates also floated the economy in terms of higher mortgage and student loan rates. they have multiple levels of impact on real people. >> thank you. >> thick you, senator. cleanority leader reid's

debt limit increase into the beginning of 2015 would be an 3ncrease of around 1. trillion. my understanding is that it is leaving the debt limit increase up to congress, that you will not negotiate, you require a clean debt limit increase and and say nothing about it negotiating preferences regarding how much or how long. that being the case, if majority leader reid's clean debt limit bill were amended to raise the limit for one month and our pastor congress, then the president will sign it? the,would have to see at the president would have -- see would have president to see it. the president has made clear it that he thinks dealing with it for a longer time would be beneficial.

we have been very clear about what we think the writing is. -- the right thing is. and president obama have repeated the talking points that negotiating deficit the debt policies on increase is unprecedented. the debt limit has been used in the past as a means to enact policies. 1978, congress has voted to raise the debt ceiling 53 thes, 27 of those, 51%, debt limit increase was tied to the reforms. i assume you are aware that more often than not, the debt ceiling is raised with other policy or reforms. that, why so aware of do you on president obama continued to use the talking

point that negotiating on a debt thet bill is unprecedented, facts demonstrate otherwise. >> i don't think that is an accurate version of history. it is not what i recall, having lived through many budget debates. if you look at the nash -- last ., only three have involved if you look at the budget agreements that did involve the debt limit, several of them -- the debt limit was just added onto a bill. it was not driving the debate. 2011, theed in affirmative case was made in 2011, a certain faction -- i am not saying it is the people in this room. if a certain faction in the halstead not get its way, they would prefer to -- in the house did not get its way, they would prefer a default. becannot have the debt limit

something that is a threat to the economy unless policy concessions are made. that is not how are our system works. at least youo on, can say that it is unprecedented to have negotiations and reforms tied to debt increase. >> i have never said it is unprecedented for debt increases bt be tight -- the that -- de increase has always been hard. since 1917, the country has been working to turn it into a ministerial vote. the debt increase was put in place to reduce the number of times hackers had to vote on that. we try to turn it into a 'stomatic vote in the 1908 -- the 1908's. it has always been a hard vote.

will it be a threat to the economy, that cannot be. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2013] >> the president has made clear that if we pass a clean cr and a clean debt limit, he is ready to negotiate. to negotiate is obvious. if you look at long-term spending on health care entitlements, it demands attention. spending on medicare and medicaid as a percentage of gdp in the next 25 years will double. ask you if the president is willing to negotiate on health care entitlements, i think you have already said what he would need his budget. not consider that negotiation. i consider that every statement of your position. negotiation means you are willing to give consideration to the other side's ideas. we have made numerous proposals

on health care entitlements. the message of the 2012 election was that the democrats the longer have to negotiate on health issues. can you convince me that that is wrong? >> i'm sorry, senator. >> kenny answered his question? reflect that does willingident has been to negotiate on both sides. he is looking for a partner willing to have give and take. >> thank you for coming, secretary lew. if this hearing has a purpose, it is to deal with debt ceiling deniers. they try to claim that default will not be a big deal. middle-class families will not be hurt, we can pick and choose which bills to play -- pay. they need a dose of debt ceiling

reality, you have given them that. you have said that prioritization is default by another name. prioritization is extremely difficult. do we pay for and that's or veterans' benefits. do we pay for education, do we pay for our troops? prioritization is extremely difficult, as you have said. do we pay foreign debts or veterans benefits? i would like to talk about the other -- by the way, one of these debt ceiling deniers, a congressman named brown, he said that much of what he learned in medical school relies that came from the pits of hell. if we are letting people like this lead us, god save america. i would like to deal with the second issue which is the timing.