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. in my view, we are like a blindfolded man walking towards

a cliff and if we keep walking in that direction, very soon, we will fall off. we may fall off on october 16 or october 17 or are over 25 or november 1 but we will fall off. the most interesting -- the most important point is we don't know which day we will fall off. the markets are somewhat mystical. they can come to the view that the u.s. will default and anticipate that and treasuries go down in value and interest rates go up much of our financial system freezes and we are back where we were in 2008 when aig failed. i want to ask you this question to be clear, isn't there a risk almost every single day starting around october 17, even perhaps a day or two earlier, and we can't tell exactly when we will not have enough money to pay our bills and default could occur?

even if you laid out the most meticulous plan and the world. >> i have been trying to be as transparent as possible for several months. i very much fear that miscalculation is something that could lead to a very severe consequence. since august, i have been very clear -- we are already on overtime. we hit the debt limit in may. we have been using extraordinary measures. we call them that that everyone assumes they are infinite. they are not infinite. i warned in august that we were going to run out of extra and remeasure sometime in the middle of october and i went a step or their which mostly has never been done and said we are going to have roughly $50 billion in cash. one month later, based on the year end tax receipts and expenditures, i updated that and said no later than october 17 we would run out of our own capacity and instead of $50 billion, we would have roughly

$30 billion. i think that should indicate that what i said at each of these correspondences is true. it's impossible to predict with accuracy. we are talking about in arm as variations in day to day expenses and an economic activity which generates tax revenues. it is impossible to predict with accuracy. it's typical to keep roughly $50 billion in reserve at all times just as a cushion against the unknown. when you talk about having less than $50 billion in drawing it down, that's a dangerous place to be. that's why congress needs to act to raise the debt limit sooner rather than later. >> they would avoid a potential cataclysm. they should not delay and say we can wait until the eve of october 17 or 19 or october 31, is that right? >> there is a parlor sport in washington of when is the last minute. you cannot do that with the debt

limit. if you look for the last minute and you make a mistake, you have done serious damage to the u.s. economy, to the world economy. it's just not responsible. it's reckless. >> would you deal with my analogy of a blindfolded man and we don't know exactly what date we will fall off? >> i have tried to describe it in my own words. >> thank you. you indicated in your beginning remarks that we face a terrible threat to the economy from a manufactured crisis. i understand the fact that the issue of whether the federal government's borrowing limit should be raised is problematic and faces -- and creates serious concerns with regard to our economy. the fact is, we do face a debt crisis. it's manufactured but we face a real debt crisis. as we hear the discussion about whether the united states is going to lose its good faith and credit, ultimately default, the

real crisis is that default. it's the one we are screaming toward because of our refusal to engage as a country. congress and the president, with regard to forming -- to reforming our failed entitlement and tax policy and dealing with the real debt crisis that we face. i think senator schumer's, about the blind man walking toward the cliff is more appropriate with regard to the debt crisis we face with almost $17 trillion debt. my question to you is -- don't you believe the long-term trajectory of our debt gives our economy a greater threat and

gives investors even more concerned in terms of their confidence about the ability of the united states to avoid default? >> we clearly have long-term challenges but i think the financial markets and when you talk to financial policymakers around the world, they see that we have made a lot of progress in the last few years. we have more to do in terms of entitlement reform and tax reform but we have taken a deficit that was nine percent of gdp and brought it in half to four percent. if anything, we are getting criticized around the world for having too much deficit reduction too fast because they want more growth.

i agree we should be dealing on a bipartisan basis with sensible balanced approaches for medium and long-term reforms. i would love to be engaged in that conversation. >> the very progress you are talking about occurred as a result of significant tax increases and the debt ceiling compromise that was breached with the budget control act. the fact is that we have not dealt -- in that compromise, we dealt with discretionary spending almost entirely. we have not dealt with entitlements with the -- which the administration says is off the table but now we have more demands for greater tax hikes. that's what the negotiations we want to engage in are about. >> the president has engaged on multiple occasions. i have been part of those negotiations. we very much believe that a balanced approach where you do entitlement reform and tax reform would be good for the country. we tried in 2011, we tried in 2012 -- we are ready to try again. the president said when we take away the threat of economic disaster, he is ready to engage. if i heard him correctly in his press conference, he said he would pay for dinner. he is willing to talk and wants to talk but it cannot be with the u.s. economy being

threatened if one small part of congress does not get its way. >> so we need another $1 trillion or more of debt the four we can even discuss whether to start reforming entitlements and reforming the tax code? >> what we believe is the government needs to open, congress needs to open the government, and congressman needs to make it possible to pay our bills and we need to engage and we are ready to do that. >> to conclude my questioning -- back to the issue of our long- term debt and the threat it poses to our economy -- are you telling me those fears have been allied? >> what i tried to say and i hope i was not confusing -- there is a challenge to deal with in the medium and long- term. it is not the same as a crisis which is what happens if you fail to act on the debt limit in the next short. of time. i would like to do it sooner rather than later and i think it's better for the country and it would've been better for the country if we had been able to mix -- to complete the negotiation where the president and speaker were closed until house republicans said they

would not vote for it. we would love to be in a place where we were talking about a sensible alternative to these mindless across-the-board cuts. we have been clear about that. it cannot be with the threat that the government is shut down and we will default on our bills. that is not a way to engage in the kind of bipartisan negotiation men need to happen. >> thank you for your testimony about how you think this serious prospect and uncertainty to the market are right now. i guess that is my question to you. everybody is talking about default as if that's the triggering point. this moment could happen at any time according to your testimony. the reason i brought this chart if you're not involved in the financial markets, it is a mysterious thing. this chart shows the treasury is held in the u.s. by businesses but in europe and china and there is -- it is a network,

complicated and complex. it comes to all the individuals involved. it is not just picking up the phone and calling wall street and telling them to settle down. my question is -- i just went on the web and wondered about treasuries and if you google treasuries, it it comes up the most important market indicator, way important than the stock markets, how important a number it is in the economy because of interest rate teeing pegged off its interest rate. here we are now basically almost talking the interest rate up with the talk in the city in the last 48 hours i can point out this chart because we have seen a dramatic spike from

0.3%, which is more than doubling in 48 hours. if the interest rate on treasury's in the next 48 hours i am, aren't we already to that tipping point? >> i have been trying to careful and report what has happened. i cannot predict what markets will do. i think if you look from last week to this week, a tripling of interest rates on short-term bills is not a good thing. we have seen stability in the long term bond markets but markets are delicate things. i don't know how markets will translate one day's news or actions into discomfort. i do know that every week we roll over $100 billion of treasury bills. that relies on the market eating open and willing to function. i think everyone has to remember

it's not just interest, it is also the principal. the markets have to keep working. >> i think the thing that people are missing in dc is that everybody is at risk in the u.s. economy. it's not just what you just explain that everybody at home. last time, we had this discussion about whether we were going to default or not and the stock are could drop 20%. -- and the stock market dropped 20%. we could have this discussion and by monday, one of my constituents that you could see as much as a 25% drop in the stock market. this is triggered off a treasury so we don't have to go to default. just the talk of default is causing the level of uncertainty we are trying to avoid. >> that's what we saw in 2011. we had an 11th hour agreement then and we avoided seeing what happens when you cross the line. we had the damage spread we had the drop in the market, we had the higher interest rates and we suffered a downgrade in the u.s. credit rating. that is what happened when we did not cross the line. i don't think any one should

want to test what happens when we cross the line. with the government shutdown, we are seeing every day that new things are coming out that are really bad. people thought it was ok to shut down the government and are now rushing to open up one piece or another at a time. it would be reckless to see what happens when you cross the line and don't pay america's bills. >> i think what we are doing is reckless and i hope our colleagues will come together. thank you. >> senator roberts. >> thank you. i don't think we have a blindfold on walking toward a cliff. i think we are walking toward a cliff with their eyes wide open. that's the problem. all this talk about self- inflicted wounds -- it was not a self-inflicted wound when we

raised the debt limit and we also achieved the hollings act, the balance of budget act. it has been referred to by other senators. it gets down to a willingness to really negotiate. [feedback] it's the nsa again. the president said over and over again that he will not negotiate but i don't think that's true. there is a meeting as reese week with republican leadership in yesterday he met with democrats. you have been briefed on the agenda of this meeting with regards to the time that the president would defer to an extension of the debt limit and the agenda, i'm talking about sequester flexibility with the appropriations committee oversight, the repeal of the medical device attacks, the restoration of the 40 hour workweek to the aca as opposed

to the 30 hour work week causing all the problem and perhaps even a decision or at least a time frame on a decision on the keystone pipeline. there is a long list that all of us have that we have talked about. senatorcrapo asked specific questions on entitlement reform. that's the real cliff i think we are walking toward. i would only opine to you that why this is so tough, the american people get this. maybe not on the shutdown, although there has been a lot of debate back and forth, but they sure get this on the debt limit. 52% do not want any interest in the debt limit. they get it. they look at this is their own family budget and they understand this. 70 -- 80% say no spending -- no increase without any spend reform and we hear no negotiation.

it reminds me of the debate of the paris peace talks in the vietnam era, thus size of the table in the height of the chairs. maybe this morning when the president recently republican leadership and the democratic leadership previously, we could get the high chairs and we will take the low chairs. this is silly. senator schumer said that basically we are walking toward a cliff with a blindfold. i think we have the blindfold off. no action on entitlement reform, no action on tax policy -- i have been to the dinner with senator isaacson at the white house print it was a privilege. when we talked about how we achieve the grand bargain on tax reform, the president said he needed $800 billion. that prices been raised by the distinguished majority leader to

$1 trillion. i don't think you will find much support on the side of the aisle for that. we talked about reform, he said why can't we take mortgage interest and charitable giving and retirement? he gave some specific examples. i tried to put in regulatory reform and i would put that in on the agenda if you agree to it. or if the president would agree to it. we will not do that. we will not test everything in the tax code and we are not going to raise taxes $1 trillion. that's a nonstarter. i hope we can do that. have you been briefed or what is the up to date news you can give us about the agenda of this meeting as to the time amount and as to what could be on the table?

>> the president has been very clear. congress needs to reopen the government and make it possible for us to pay her bills and then he is open to talking about anything. it is not a question of the shape or size of the table. it's a question of whether there is give and take. >> you indicate that the president is willing to negotiate but he is not willing to tell us what agenda or what specific arts of the agenda he might be interested in or not or the timeframe? >> congress has to open the government, congress has to make it possible for us to pay his bills and he is to -- and he is happy to talk about anything. he is clear about what he wants to on in our budget and numerous communications. give and take means everyone coming and doing hard things. he demonstrated his willingness to do hard things of others are willing to do hard things, maybe

we can do something important. >> i am over 13 seconds, i apologize. i think what you are saying is if the government shut down can be discontinued, everybody wants that, i don't want to get into that debate again, but he is willing to negotiate only if we end of the shut down and to an extension of the debt limit and then he may negotiate with an agenda that's just amorphous. >> he has always been willing to negotiate just not with the threat of destroying our government. >> my colleagues have already expressed a series of dimensions in which both the shut down and the threat of default affect our country domestically economically. i want to look at a different dimension that has domestic issues. in the other role i play as chairman of the senate foreign relations committee, i worry about the incredibly extremely negative affects the government shut down and the threat of default have on our foreign policy and their national security. both now and in years to come. the shut down and the default affected some of america's near- term foreign-policy priorities such as the president not being able to go to the asian economic

summit. his absence although appropriate due to the crisis feeds into existing fears having traveled to the region that our rebalanced asia is more rhetoric than reality. who showed up and was more than willing to fill the void, china. in doing so, america's loss is china's gain. this is an opportunity about opening markets for u.s. businesses, and to sell products and services, this is an opportunity to promote economic and security questions. i think our allies are going to wonder -- is the united states capable of meeting its promises whether about economic initiatives or security initiatives. perhaps the most damaging and difficult thing to reverse is the impact this has on america's reputation in the world and the economic consequences that flow from that. the entire global financial system depends in large measure

on the faith that the united states government can and always will pay its debts. america enjoys the unique privilege of having its currency acts as the world's reserve currency. it seems to me but playing political games, we give credence to other emerging powers like china and brazil who want the world to become less reliant on the dollar and there are consequences to becoming less reliant on the dollar. not only does that undermine our standing in the global economic system, it puts our dependability in question with allies.

in your role as treasury secretary, you fill various international roles. can you give the committee a sense of the consequences at home but there are consequences abroad that affect us here at home. >> i think it would be impossible to overstate the importance of playing the role we do in the world in terms of stability. there's a reason why the dollar is the the reserve currency. the world counts on us being responsible and making the kinds of decisions they can continue to look to washington for that kind of stability. we have finance ministers from around the world gather in washington this week. yesterday, i met with the finance ministers from africa and latin america. it is challenging when they look

at you and they ask what is going on in washington. and makes them nervous about their economies and we need them to have growing demand because that is good for our economy. this question of world reserve currency, it's no secret that there are discussions around the world where others would like there to be a basket of currencies that might be used as an alternative to the dollar. i have to ask the question -- when our role in the world is important to our economic stability and to the world, why would this kind of a manufactured crisis be seen as something that is necessary to pursue when it undermines that? the questions you are asking are quite significant. >> some suggest that is not a real issue because the rest of the world has no place to go. >> i'm not going to speculate on

whether someone else will emerge as an alternative. we are in a place right now where it's important for the united states and the world for us to maintain our position and we have the capacity to do that. we have the economic ability to do that. it's only a medical of lyrical will. >> and there is no reason to risk that possibility, to continue to find out whether there is some other universe of currencies for which people could look to and there is no reason to risk having the potential economic impacts we can have globally that provide domestic opportunities for growth and jobs and opportunities? >> i think there is no reason and i would go further and say it is against their interest to invite that kind of discussion. >> thank you, mr. chairman. mr. secretary, i think this is the 11 time i have been through this discussion about the sky is falling and the earth will erupt. wyoming families are not buying these arguments. they say that you cannot spend more than you take in. you can't definitely do it for ever and ever. i've got a person that in turn for me several years ago who now

is the owner of a major company in wyoming and operates in four states. he pays his people well but every once in a while, somebody comes in and says i need a pay raise. he hands them a copy of dave ramsey's basic look and says you don't have a problem with income, you have a problem with outog. that's what wyoming people think. they are not interested in having their taxes raised so that we can put more people in the wagon. i used an example on the floor the other day of how the private sector are getting upset because government keeps growing and when it grows, that means there are more people in the wagon and less people pulling the wagon. they are getting tired of it. in fact, it is getting pretty hard to pull. we are not doing anything about it. that's their impression. they can't increase their income, why should we be able to

increase our income? how do we solve this problem of outgo? we keep asking for this debt limit increase and it's always asked for as though sometime down the road, we are going to negotiate and figure out a way to solve the problem. you mentioned that you would rather we did not have these manufactured crises. america would prefer that as well. i think this is a manufactured crisis again because we did not work on it yesterday. the shutdown with government, we have not done the budgets the way we are supposed to. we are supposed to start on those on april 15 and do one per week and not get to this continuing resolution situation on october 1. everybody will know exactly how much they can spend. it does not compress the sequester like it did last year. these discussions -- i was invited to blair house when we were doing obamacare and i spent

at day of the president chopping down every suggestion that republicans made. it was a waste of a day. when we hear this thing about willing to negotiate and if you have any ideas get them to me -- it is wearing as thin as the sky is falling. why do you and the president feel we should not be discussing, right now, this dire financial situation and commenting -- and coming up with a solution that will put a little bit of room and ever something to be done right now? if these people are running up their credit card debt and need to raise their limits, they are expected to say what they will do in order to be able to take care of their debts. they are not real interested because the interest rate goes up and that's the same thing we are facing. you said it has tripled in the last week. we are running into the same problem.

why should we not present a solution? it could be a long-term solution. it doesn't have to be a one-week solution. we are not even providing a long-term solution. i put out a penny plan along with sequester that would take care of the debt in two years. not the debt, it would take care of the deficit in two years and result in a balanced budget. some variation on that might be helpful but why do you think the president should not discuss right now and come up with solutions right now in conjunction with the extension of the debt limit? >> the wyoming families know that after they wrap their credit card, they don't get to ignore it. they have to pay the bill. the debt limit is just paying our bills. you know that i would very much like to be in a conversation about long-term, sensible and settlement and tax reform to give the kind of stability going forward that this country needs. that cannot be done by saying we will not pay our bills next

week. that's what's wrong with engaging right now. the president wants to negotiate. >> we keep saying that this terrible thing will happen and this is just paying our bills. how many times can we say that? the public does not get that same option. >> the time to reduce what we need to borrow is when we make the decisions on what we are spending, not after. if congress appropriates the money and puts laws in place for people are entitled to benefits and commits military resources, once those commitments are made, you cannot tell a contractor who is doing work that i will not pay you because we changed their mind. >> that takes me back to my comment that we should take care of this one at a time. >> the senators time has expired. many senators here have

questions to ask. many senators have been good about sticking to the limits. i hope you can stay longer. they will shorten their question so you can stay. >> it will be difficult to go more than five minutes. >> thanks for joining us. i just stepped out of the room for a few months and was watching the hearing on television in an adjoining room. people watching this on tv must be frustrated and disappointed with us. some of the finest people who serve in the senate sirhan this committee and that's why i want to be here. there are people who are willing to be pragmatic and find compromises. the problem is simple. democrats need to support entitlement reform that saves money, saves these programs for the long haul and is consistent with our obligation to look out for the least. that's what we need to do.

republicans need to embrace tax reform that provides certainty and predictability for businesses and investors in this country but generate some revenue. we go back to the four years at the end of the clinton administration where we had for balanced budgets and a row and revenues as a percentage of gross domestic roddick around 20% all four years. -- gross domestic product around 20% all four years. our deficit is down from $1.4 trillion. last year, the deficit was about $700 billion. we cut it in half. it's not enough. we need to do more. we cannot do more unless we do entitlement reform. over half of our spending is entitlement spending and we cannot do more unless we generate revenues. what we have here is a failure to communicate is part of our problem. we are talking past each other.

i talked to people all the time and people have a lot of money and i say they will have to pay more taxes and they say i don't mind paying more taxes but don't waste my money. i don't want to waste their money either. none of us do. tom coburn used to be on this committee and i introduced legislation. it was not to hurt the least of these or the wealthiest of these to help everyone. everyone has gotten a letter from tom coburn to ask as a cosponsor and i hope you will join us. we held a hearing on monday this week on social security disability. no one stood -- no one wants to harm anyone on disability. one judge in west virginia approved 99.7% of the people who applied for social security disability. 99.7%. that kind of thing is the exception. there are people applying that get approved who can work and

don't deserve to be on disability. the idea that we cannot meet our moral imperative and meet a fiscal imperative is a fiction. we can do both. i would say we should not just boost our approval rating but instill confidence in the american people and stuff talk past each other and work with each other. we will meet with the president today. somehow, the president has to make it crystal clear that he's willing to negotiate and i have heard him say it on the entitlement stop. the republicans have a willingness to negotiate on tax reform that generates some revenues. there is a matter of trust here and i don't know how to break through. any ideas? >> i think the kinds of conversations that he is having are meant to try to rebuild some of the trust and make it clear that once we get beyond where we are right now and once congress reopens the government and takes away the threat of default, he

has been and remains open to honorable compromise which means give and take. it has to be a two-way street and that has always been the case with any negotiation. you, senator. >> i will be brief. debtve heard a lot about limit deniers that october 17 is not the day we default. we can payre that china and wall street first. the fact of the matter is that on that day they would run out onborrowing capacity thursday, which is today the treasury opens the auction to .oll over $100 million in debt if theyon what happens

did increase on thursday, what would happen if we were unable to roll over the $100 billion in debt. the history is clear that anxiety leading up to 2011 cost a bad market reaction. we have seen unease with maturities in the time between october 17 and the time in nearly after that. i cannot say anything about the likelihood of there being a problem. the consequences could be quite serious. having to instead of pay your monthly payment on a mortgage, having to pay the mortgage. i willnd question, and be brief. over the last couple of weeks, i spent a lot of time calling people in ohio, community

bankers this is executives, people running research institutions, small manufacturers. i do not know their party in most cases. i assume most of them are republicans because their lines of work might suggest that. they say the same thing. why is this happening? they do not understand why this is happening. they increasingly understand it is one faction of one party in one house in one house and one branch of government that has rocked much of this to a halt. -- rocked much of this to a halt. the national association of manufacturers, the largest manufacturing association in the country, wrote on monday -- "the failure of policymakers to address the debt limit is injecting uncertainty in u.s. economy, hampering the ability of manufacturers and the broader business community to compete, and invest, and create new jobs." for the last several years, since the health care act, since dodd-frank, the

criticism i hear more than anything from business in my state is uncertainty, uncertainty, when are the dodd- frank rules going to be finished? what's going to happen with implementation of obamacare? all of these. the uncertainty, that pall that they claim hangs over our country, our economy, i hear, and especially from politicians who are critical of many of these programs. so my question is, if we agree to a short-term clean debt limit increase, does that provide the certainty that we would need to compete? >> senator, i've tried to be clear that i think longer certainty would be very good for the economy, and the shorter the period, the less stability it provides. you know, when you talk about shifting debates to different time periods, retailers are very worried about what happens in november and december if we are going through what we're going through now. so i think longer is better but avoiding a crisis is better than having a crisis. and in no case is the president going to end up in a position

where the threat of destroying the american economy is the basis for compromise. he wants that negotiation to be with the basis of the kind of give-and-take that honorable compromises come from. >> this is -- thank you, mr. chairman. this is the worst uncertainty and the most precarious uncertainty i've ever seen in our economy in my time in public office. and what's tragic about it is how self-inflicted it is. thank you, mr. chairman. >> thank you, senator. senator portman. >> thank you, mr. chairman. secretary lew, you've said again today the president won't negotiate on the debt limit. and the president, as was noted earlier, has asserted that there haven't been additional items added to debt limits in the past. and, as you and i have talked about, and as you know, when you look back at the last 30 years of the history of debt limits, it's the only thing that has worked. in fact, every significant deficit- reduction package that has passed this congress in the last 30 years has come in the context of a debt limit. i found one that didn't. it was in 2005 for about $40

million, a relatively small deal. that's the way it has worked. and it's gramm- rudman, it's the 1990 balanced budget agreement or the andrews air force base agreement. it's the 1997 balanced budget agreement. it's pay-go rules that many in this committee on the other side of the aisle talk about favorably. of course, it's the 19 -- it's the most recent budget control act, just a couple of years ago. all in the context of the debt limit. so my view is kind of strange the president would, one, not want to negotiate, but, two, say we haven't added stuff. it's all that has worked to deal with this. and you indicated this earlier, it only makes common sense because it's a tough vote, as you said. why? because our constituents don't get it.

\get it. you know, why would you extend the credit card again, go over the limit again without dealing with the underlying problem? and that's why, you know, the polling shows that by over two to one the american people say, yes, we should extend the debt limit but only if we deal with the underlying problem.

and that's all we're asking for. i'm speaking for myself. i will say we need to avoid a debt limit crisis. but we also need to avoid a debt crisis. so avoiding a debt limit crisis today and avoiding a debt crisis tomorrow should be our objective. the president himself said back in 2006, when the debt was half as big as it is today, $8 trillion, and this was a floor speech, america has a debt problem, and a failure of leadership. he said, i'm therefore going to oppose the increase in the debt limit. he opposed it when it was half as big as it was today. he said we needed to deal with the underlying problem. and in response to senator hatch's question earlier about why the president refuses to deal with the underlying problem, which we all know is that two-thirds of spending and the biggest part of the spending and the fastest-growing part of

the spending that is on autopilot that we don't appropriate every year, which is the mandatory side, in response to that question you said, and i quote>> "he put in his budget significant entitlement spending reforms, he wants to do this." and, in fact, you're right. the president's proposal includes a pretty long list of entitlement savings, mandatory savings, adds up to about $730 billion over 10 years. a step in the right direction. during that time, by the way, we're likely to add another $8 trillion to the debt based on cbo, congressional budget office. but he has got $730 billion over 10 years. now not all of those choices reflect my top priorities, or others on this committee probably, but in a negotiation you don't get everything you want. so my question to you today is really very simple. by adding some of those proposals, maybe not all 730 billion, maybe it's 500 billion, maybe it's 400, but by adding some of the president's own proposals to an extension of the debt limit, consistent with what has been done historically, and consistent with what the american people are asking for, couldn't we move forward and isn't that what we ought to be doing? dealing, yes, with the debt limit, but also with the underlying problem. and taking the president's own proposals to do it. >> senator, on the history of the debt limit, you and i have been back and forth many times. i think it makes a big difference if you tack a debt limit increase on to something

that has already been agreed to. in 1997, the balanced budget agreement was all signed and sealed and then the debt limit increase was put into it. it didn't drive it. nobody threatened default. so i think we're in a given situation since 2011. and that has changed-- >> well, nobody threaten default because you've never had a president saying he wouldn't negotiate. >> and the president has said and has just repeated this week he wants to and is prepared to negotiate. i think it's important not to just go through a president's budget and cherry-pick the things that are hard for him to do. you have to look at the things are hard for others to do, because a negotiation is give- and-take. if everything is on the table, if we're looking at entitlement reform and tax reform in a way that join together to solve the problem, there could be a serious conversation. but i just would caution to just not take one side of the ledger. >> well, let me focus on that, because the president also says in that budget that he believes we ought to have tax reform. and specifically with regard to corporate tax reform, for the first time in your budget you indicated to be revenue neutral, and i applaud you for that, as

you know. i think that's important. i think it's an urgency right now that if we don't deal with it, we're going to continue to lose more jobs in this country. my question to you would be, the president's own proposals on entitlements, i agree there should be a give-and-take, but i'm willing to just say, let's look at the president's own proposals, putting those into this debt limit increase plus directions to the congress on tax reform, as you all have suggested. would you all be willing to move that forward? >> well, just to be clear, the president's view on the debt limit, he has stated as clearly as he can, he's not negotiating over the debt limit. >> ok, senator bennet. >> jack, this is important, i mean-- >> no, this is very important, senator. >> nothing more important than this. and i want to make sure everybody on our side at least has a chance. >> thank you, mr. chairman. thank you, mr. secretary, for your indulgence. i'll just take a few minutes. in your view, would failing to raise the debt ceiling make our debt and deficit situation better or worse? >> well, it doesn't do anything good. i mean, if the cost of borrowing goes up, it raises our expenditures, it doesn't reduce

them. >> and if the cost of borrowing went up just 1 percent or 2 percent, we're at historically low interest rates, what would that cost us? >> you know, i would have to go back and do the numbers exactly to give you an answer. but, you know, these are -- we're talking billions of dollars, we are not talking about small numbers. >> so i think it's -- i mean, it's very clear, and ronald reagan shared this view. you quoted him earlier that this would just make matters worse. >> yes, it -- unless we were to do something unthinkable and say, we'll never pay those bills. you've got to pay the bills or then you're going to be borrowing money at a higher interest rate, so it only costs. >> which means that our interest costs are just going to continue to go up and our ability to do things like respond to the floods in colorado or be able educate our kids will be diminished. i'm going to let you go because i know you have to go, but i've heard a lot of people on both sides of the aisle today talk about their willingness and their desire to try to meet in the middle, and i think that's important. and i think we need to do that because i can tell you this, people in colorado, they are sick and tired of a lot of things about washington, but what they are mostly sick and tired of is our managing by crisis, and, therefore, our inability to manage the affairs of this country in the way, in this case, that threatens the full faith and credit of the united states and our ability to have the reserve currency for the world be the american dollar. thank you, mr. secretary. >> thank you, senator. senator toomey. >> thank you, mr. chairman. secretary lew, you've said a

couple of times in reference to previous discussions over the debt limit that it's different now. it's true it is different now. i would argue now it's much more urgent that we deal with the underlying fiscal problem. now, unlike in past years, we're spending $3.6 trillion. we've run up a string up unprecedented deficits. the modest improvement you alluded to, you know that's temporary. and it's scheduled, if there's no structural changes, for those deficits to get much worse not terribly far from -- from today. we now have a total debt that's over 100 percent of our total economic output, i believe already limiting economic growth and prosperity. we have trillions of dollars of guarantees that we didn't used to have. we have tens of trillions of dollars in unfunded liabilities. we have large entitlement programs, the largest of which are all growing faster than our economy and, therefore, are on a completely unsustainable path. so what's different, it seems to me, is our situation is much more dire now than it was in previous discussions. nevertheless, the president is saying, "you give me everything i want, and then we could have a conversation about these things that are important to you." i still find that shocking. but here's -- here's the bottom line, it seems to me.

if the president refuses to agree to include even a modest reform that begins to take us in the direction of a more sustainable path in the context of a debt ceiling increase, there appears to be a real chance that this congress will not pass a debt ceiling increase before october 17th. now, i hope that we do pass a debt ceiling increase with appropriate reforms because there's no question in my mind at some point, if we don't raise the debt ceiling, it will become disruptive. as you know, ongoing tax revenue's only about 85 percent of all the money this government intends to spend in the coming fiscal year. so if we only get 85 percent of everything we intend to spend in tax revenue, the 15 percent shortfall would have to be covered by borrowing, or else we wouldn't be able to pay everything in full and on time. and that would be disrupted. but the greatest disruption by

far would occur if you were to choose to not pay interest on our debt. senator cantwell made a very compelling argument about the unique role that u.s. treasury securities play in the world, and for the united states. so my question for you, mr. secretary, as the secretary of the the treasury, are you prepared to assure us, but more importantly, the millions of americans who are investors in u.s. treasury securities and the entire american economy, that under no circumstances will you permit a missed payment on a u.s. treasury security obligation? >> senator, the only way to make sure we can pay all of our obligations is for congress to act and raise the debt limit. no president has ever had to decide whether to pay some bills and not others. >> i understand. that's a different question, though. >> the law is complicated, and i am not the one who makes that decision, as you know. >> no, i think you would make it. >> if you look -- no, no, it's actually not my decision.

it is something that the president would have to decide. and i'm telling you that it would be -- put us into default if it went to a place where we could pay one bill and not others. what would you say to people on social security-- >> i have acknowledged that is very disruptive, and that is not where i hope to go, but i only control one vote in the senate, and the administration controls zero. and they control zero votes in the house. and so it would seem to me the only appropriate thing to do is plan for contingencies. so are you telling me that the president would decide to ensure that we would not miss a payment on treasury securities? >> senator, what i'm telling you is there's no good solution if congress fails to raise the debt limit. and that's why the president's called on congress to raise the debt limit. you know, you -- you used the number 80-85 percent coverage in terms of revenue. that's an annual average. >> i understand. >> some months-- >> it's uneven. >> -- it's 50 percent. >> that's right. >> so the amount that we fall behind in payments is just unthinkable. congress has to do its job and act. >> and i certainly hope that the president will work with us so

that we can avoid this. but, i'm -- i'm -- frankly, i'm shocked that the secretary of the treasury will not assure the financial markets, american investors and savers, and the millions of people who hold treasuries that they don't have to worry about the security of their treasuries. i'm extremely disappointed. >> i -- i would refer you back to statements by president reagan and secretary jim baker, who made the same warnings that i'm making. because only congress can act to raise the debt limit. no president has ever been put in a position of having to figure out what bad options-- >> ok, i understand. i'm almost out of time. >> -- [inaudible] if congress doesn't act. >> on tuesday, the president said, and i quote, "we plan for every contingency. so, obviously, you know, worst- case scenario, there are things we will try to do," end quote. could you tell us about these contingencies? >> well, you know, senator, the the options are all bad. >> i agree. >> you know, i tried to earlier describe how complicated the federal payment system is. there is no way to make our federal payment system work well to pick and choose what we pay.

so we're gonna be in a place which is uncharted territory. and anyone thinks it works smoothly has-- >> it would not work smoothly. it would be chaos. >> the question is whether the treasury is prepared to try to minimize disruption. >> well, obviously, we -- we have looked at many options. there has been, you know, reports indicating things that have been looked at over the years. nobody's ever had to put any of these into effect. they're not tested. >> ok, senator. >> your time has has expired. i'd say -- senators are very patient. i also note there are four senators left who don't ask questions. and if i might ask them, mr. secretary, if they can state their questions in 10 seconds each. and don't -- you won't have to respond to them. >> i'm happy to-- >> ok, right. so -- just for their questions because we don't have time, would be senator casey. >> mr. secretary, thanks very much for your testimony. my question relates to social security and medicare and veterans' benefits. just going to read two lines from a letter that i got from a constituent, talking about her parents>> she said, "at 85 and

83, they should not have this uncertainty" -- the uncertainty about the impasse -- "these should be their golden years. it breaks my heart to see my mother saying she cannot sleep and has a stomach ache from the worry about where our country is headed." tell us about the -- the impact of the -- the default when it comes to social security, medicare and veteran's benefits. >> senator, i -- i told the senator -- if i could have to answer questions because so many senators have to ask. so, and i appreciate the question. >> i'm happy to follow up at some -- >> ok. next, senator stabenow. >> well, thank you, mr. chairman and mr. secretary. i'd just like to ask that we put in the record the complete letter from the national association of manufacturers and i would read one sentence>> "a default would put upward pressure on interest rates, raising both short and long-term costs of capital and discouraging business investment and job creation in america." >> thank you, senator. senator nelson? >> 10 seconds. mr. secretary-- >> [inaudible] >> i'm concerned that you have indicated that we might agree to a short-term

extension on the debt ceiling and i think that would be counterproductive -- we'd be back in this soup right at -- at the end of that short-term extension. i commend the president for standing firm. we can't negotiate over the debt ceiling. national security is another consideration. i'll put that in the record. thank you mr. chairman. >> thank -- thank you, senator. senator cardin? >> mr. chairman, thank you. secretary lew, thank you for being here and thank you for giving us -- it's our responsibility to pass the extension of the debt limit. it's congress' responsibility to do this. uncertainty is really hurting this country and we can't govern from crisis to crisis. so, i strongly support your view that the longer term is what we need here. my question would be what legal

authority do you have to pick and choose? it seems to me that any analogy we use to a company or business that cannot pay its bills, there's a limit as to the discretion as to how you can make those judgments. i'd be interested as to the legal authority you have on prioritization. >> thank you, senator. other senators are not here, obviously, be able to submit-- >> i'd be happy to-- >> questions to the secretary-- >> [inaudible] >> secretary, you've been very generous with your time. we deeply appreciate it. thank you very much. >> thank you, mr. chairman. >> hearing's adjourned. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2013]

>> president obama hosted senate democrats and house republican leaders at the white house late yours they knew -- afternoon to discuss the shutdown and a gop proposal for raising the debt ceiling. after the visit, majority leader harry reid spoke with reporters the whiteht -- at house. and there was reaction from house majority leader eric cantor. >> i introduced the president by telling my caucus how proud i was of them and how proud i was of the president for the strength and unity we have shown. after having completed an hour and 45 minutes with him today, i feel the same way. we are here.

the government should be open now. we should be able to pay our debts. as we have said and will continue to say, if that happens, we will negotiate on anything. the president confirmed that today. >> [indiscernible] house has a unique form of legislating, hour by hour. i do not know what has happened in the 2 hours i have been gone. floated 2 been different proposals. let's wait and see what the house does. when they sent us something, we will look at it as clearly as closely as we can under the same determination we have made. "for the. there is so much pain and suffering out there. open government.

it is tearjerking. we want the government to open. we want to be able to pay our bills. this is a situation where they do not know what they want. i hope the republicans decide what they want. we will be happy to work with them in anyway. i repeat for the fourth time right here. open the pay our -- government. let us pay our bills. would you agree to a short- term deal? >> we will look at anything they sent us. , they out of this meeting have changed on how much time they want on the debt limit. let's just wait and see. there are some rumors they want it ties to the cr. let's wait and see because they

cannot decide what they want. >> it has been very clear. you had a clear position and the president had a clear position. you need a clean cr. prettyublicans were clear earlier today. they want to negotiate before you open government. >> not going to happen. do you want to do this? >> that would be great. >> ok. very useful meeting. it was clarifying for both sides as to where we are. are going to be talking further tonight. we will have more discussion. we will come back to have more discussion. the president said he would goes with-- he would consult the administration folks.

hopefully, we will see a way forward after that. 's the family research council and he will values voter summit --ins with speeches by max michael lee, ted cruz, rand paul, michele bachmann. you can see that live on c-span 3 at 9:00 a.m. eastern. in a few moments, a look at today's headlines, lest your calls and tweets, live on "washington journal." at house is back in session 9:00 eastern. later, another agency-specific spending bill.

and in 45 minutes, we will look at the republicans' approach to the shutdown and the debt e, aing with leonard lanc member of the energy and commerce committee. we will continue to take your calls, when our guests will be democratic representative george m -- george miller. ♪ host: president obama and house republicans are in talks for a temporary debt to fix after the gop offered a six week extension of the nation's debt ceiling. good morning on this friday, october 11, 20 13. the house and senate will be in session over the weekend.