we will now begin asking questions of our witnesses. will the clerk please put five minutes of clock for each member. this question is for the full panel. no matter where you stand on fiscal issues, or even health care, should congress seriously entertain a default on our debt, and what do you believe is the most troubling long-term impact if the u.s. does not pay its bills on time? mr. keating, let's start with you. >> as noted by my fellow panelists, if the united states defaults on its debts -- a little bit or a lot -- would be calamitous. we have to think in perspective what has occurred over the course of the last number of years. from 1789 when our republic was

established until the year 2000, the debt was $5 trillion. according to the policy center, the rivlin-domenici panel, between 2000 and 2009, the national debt roughly doubled. now it will double again. the figures are scalding, and i am sure that the congressional panel, as well as simpson- bowles, and i am sure rivlin- domenici found the same thing. in 2020, it will be $1 one -- it will be $1 trillion a year just to pay the interest on the debt. by the year 2025, every set of federal tax revenue will go to social security, medicare, and interest on the debt. what is required as noted is to get through the default period because it will obviously raise interest rates and create real havoc in the community bank environment, most particularly, the ability to borrow and lend

money, and then sit down aggressively and in a bipartisan fashion to focus on this runaway train. in 1950, the average person retired at 62 and died at 69. or 65 and 69. today, the average person retires at 62 and dies at 80. so all the actuarial tables are off. we are mercifully living a lot longer, which is causing huge stresses in our ability to provide for the elderly in the united states, and it will continue to diminish and darken over the course of the next 20 years. >> mr. benson? >> i say two things. one is voluntarily defaulting on the debt is something that does not make any logical sense. it will create huge operational problems in the financial markets that would permeate across the markets. treasuries are used in escrow. it will affect municipal bond

issues. it will have profound consequences in liquidity and could create crises if it were to go on, even with potential workarounds, to deal with defaulted t-bonds. the other thing i would say is with respect to the long-term fiscal condition, the default woulddefault voluntarily make resolving the long-term fiscal imbalance is just that -- in balance is just that much imbalances that much more difficult.

it seems to me it doesn't make any sense to do so if you don't have to. >> from the real estate perspective, i think that we would have, we would fall back into a deeper recession. there is no doubt in my mind that that would happen. if we reached a debt ceiling impasse, the default on u.s. debt could be very long-lasting. interest rates would undoubtedly rise, meaning less people could afford to buy or refinance homes. housing prices would plummet again. you would have a catastrophe in the real estate industry, which would lead the economy back into a deep recession if not a rep -- a depression. it also raises the rate at which we would borrow and would make it more difficult for us to meet our debts in the future. i don't see any possibility of it being a good outcome. it is going to be disastrous. >> mr. chairman, i think the key element is confidence. we are the biggest borrower in the world. we have to engender confidence in those people who are lending us money. the treasury's history of repayments and the smooth operating of the treasury market has created that high level of confidence that permits us to borrow at very low rates.

i don't think it is in the interest of the american people to do anything to give our investors less confidence in the united states. that would include either failing to repay, or as i said in my testimony, so much debt that it will not be supportable. >> mr. stevens, some in congress have proposed payments to bondholders should be prioritized in the event of a default. is this a workable long-term solution? >> to go back to my previous answer, i think it, to some degree, misses the point. if you are household and depending on the bank for continuing financing, and the bank learns this month you will decide to pay these bills but not those bills, doesn't engender greater confidence in the bank to continue to lend you money. that is the key point. the money that you are lent, if you are lent any, is going to be much more expensive. it makes the whole that you were -- it makes the whole that you the hole that you are

>> senatorch deeper crapo? >> i want to come back to basically what i talked about in my opening statement, which is the fact that while we debate the consequences and circumstances surrounding the debt ceiling battle we are having in the senate and house right now, the real issue that we need to be focused on -- i agree with all the comments about the seriousness and consequences that would occur if we do not pay our debts, i understand that -- it seems to me that the real threat of default that the united states is facing is the debt crisis that we are facing. we all know that one credit rating agency has already downgraded the united states, the good faith and credit of the united states. they didn't downgrade it over a debt ceiling. they downgraded it because they lost confidence that we are willing to deal with our debt.

that is the issue that i believe we need to focus on. the cbo has recently stated that if we continue our current path, at some point, investors will begin to doubt the government's willingness or ability to pay u.s. debt obligations. i think at some point -- i think some point soon, another credit rating agency will be convinced that we will not deal with our debt crisis. the question i have for the panel is, is the threat of default that each of you have talked about -- default on our u.s. treasury obligations -- is that threat greater because of the fight we are having in washington right now over the whether the debt ceiling will be extended or is it not far greater over the fact that we cannot get into negotiations to resolve our entitlement spending and to reform our tax code?

mr. stevens, i know you mentioned this in our cash in -- you mentioned this in your comments. >> senator, as i said in my oral statement, i think credit worthiness depends upon two things. it depends upon paying your bills on time. it also depends on not racking up so much debt that you cannot support it. it is a combination of the two things. i don't think you can have one without the other if you really want to maintain a good credit rating. >> mr. thomas? >> i would agree. i think you have to attack both. you have to do it in a deliberate manner that does not upset the international marketplace. i think we have to do with the --we have to heal with the deal with the debt ceiling first and then go on to the looming question, the elephant in the room, and that is the entire debt.

>> mr. benson? >> the two are certainly linked, senator, but it seems to me, just as you would if you were going through corporate restructuring, if you are going to go through a fiscal restructuring of the united states to repair fiscal imbalances over the long run, you're still going to need to access the credit markets to do so. you wouldn't want to do anything that impairs your ability to access the credit markets to get on a glide path. while i do think they are linked, no question, and they both need to be resolved, you do have one that is in front of the other. you ought to be careful not to make a longer for job any difficult by not addressing the short-term issue. >> mr. keating? >> i agree with ken benson. there are really two issues. they are interlinked. for me as a community banker if , you came to me and said, i'd like to borrow some money, but i'm not sure i can pay back, i assure you that the interest rate would be considerably

higher if i made the loan at all. if you said, i won't pay it back or i haven't paid back my other loans, i wouldn't make the loan at all. that is a reality that faces families, and that is a reality that faces the united states. a big part of our debt, the reason we can't pay our bills or won't pay our bills, is entitlements. they are linked together. as i said, mercifully, our families are living longer, but that is a huge actuarial challenge that we have not prepared for. >> thank you. not going to ask another question, but i will conclude with a comment. i understand the linkage. there's another aspect of the linkage. we just had a hearing about an hour ago with secretary jack lew, the secretary of the treasury. in questioning him, i asked him whether or not the real threat we faced was in the long-term the long-term debt

crisis and that that was a greater threat to our credit worthiness. in his answer to me, he said, we've been making some progress on our long-term debt crisis over the last couple of years. he admitted that we haven't touched entitlements, haven't touched tax reform, but he said, we have started to make some progress. i pointed out to him and i will point out to you, that progress came in 2011 when we were fighting over the debt ceiling increase and we adopted the budget control act, which put into effect our ability to deal at least with discretionary spending. although we can argue over whether that was done well or whether it could have been done better, the fact is that that debt ceiling increase was accompanied by some fiscal reforms. that is what we are trying to achieve here today. >> senator reed? >> thank you very much. mr. benson, if we default next week, even technically, your view, i believe, is that will make our ability to do almost everything, including deal with the long-term economic problems, much more difficult. is that fair?

>> first of all, you made this comment in your opening statement. we are already seeing the risk premium being priced into the market today. the short end of the treasuries are up 30 basis points. a dramatic shift. the haircuts of repose are going up. the pricing effect is already happening. if we miss a coupon, we would assume that that pricing effect would be exacerbated. the other thing that we think would happen -- again, our members are working to gain this out because no one has ever been through this, the documents are not structured for this, systems have never been set up for this. while there are efforts being made to see if we get notice

from treasury that a coupon payment will be missed and extended to another day, how do you keep the treasury security with the missed coupon payment transferable or pleasurable as collateral -- it is not entirely clear. we think if it is done quickly and before the asian markets open that it is possible, but you still have that coupon that is pulled out of the market. there is some liquidity associated with that. it is not clear when that would be paid. it is not clear whether interest would accrue. you have potential lost revenues there. then it's not clear whether if those securities are no longer considered eligible collateral, what change effect might occur, -- what change effect might occur not just with the ability , from a repo transaction, but whether or not they are in a municipal escrow, whether they are pledged as collateral for flops or any tort -- sort of -- four flaw -- for swaps or any other sort of transaction,

whether counterparties would ask for replacement, or whether escrows would have to be changed. it has a friction that can run across many parts of the market. >> in effect, what you are describing is a potential financial meltdown, perhaps worse than in 2008 with the collapse of lehman brothers, which required massive sport by -- massive support by the federal government to restore confidence and stabilize the government. frankly, i don't know if that combination of factors would be able to support such an effort. you raised an excellent point, which is -- everyone might have very good intentions of trying to manage through this crisis, but software systems, documents, legal requirements, uncertainty would be such that you could really paralyze the market. liquidity could freeze. you would have something that would make 2008 look like a walk in the park.

governor keating, again, i think your comments were about the impact of this. the proportionality. we are looking at a crisis that could trigger, ironically, worse deficit complications that could exacerbate the long-term trends even more dramatically as interest rates go up. you have a particularly valuable point of view, representing bankers all across the country. the impact on main street. one of the issues with prioritization, we are not prioritizing between paying federal debt and trivial expenses of government. we are talking about social security payments, medicaid payments to states. states could basically start buying into their own competitions.

if you were told by hhs that no medicaid payments were going in, what do you do? are you on the hook for it? what do your hospitals do? do they declare bankruptcy because their covenants require that they receive a certain amount of income each month? in some cases, yes. then we go down to social security benefit payments. are we telling social security recipients they are going to take a 5% haircut because we are going to pay our credit? frankly as i read all of these , constitutional advocates, as i read the fourth amendment, it doesn't make any distinction between types of debt. it's a public debt. all of this would be construed as public debt. can you tell us on the street what your impression would be? >> community banks and even large institutions that i work for are very alarmed. because of the uncertainty, because of the panic, because of

the potential for long-term, destructive results. if i were secretary of the treasury, if you are secretary of the treasury, and we had so many dollars, you would say, we technically in default if we don't pay social security? i don't know. i know we are technically in default if we don't pay all of these bonds. we've got to pay the bonds. then we've got to continue to bonds.es to pay the the investments, the coupons on treasuries. then what? at some point, you're going to run out of money. at some point, because of the fear in the marketplace, there'll be less lending, less borrowing, less buying, less tax revenue. you are trying desperately to figure out who you pay first. i would try to figure out who i pay for -- first. in that desperate situation i think most of us would do that.

that is a crazy way to run the greatest economy the world is -- the world has ever seen. the history of the united states, it was after the revolution that we had a very hard time -- that is when robert morris, the financer of the revolution, made it very clear, we will not pay our bills plus if we don't have access to credit. you better have gold and silver, or else nobody will do with you. -- nobody else will deal with you. that was a calamity about to happen. defaulted, even in those days when we didn't have anything. here we are, we are seriously contemplating that as a sensible, intelligent reaction to a political stalemate? i hope not. as i used to say in oklahoma to my democrat friends, if the uss oklahoma goes down, we all go down together. if the uss united states goes down, we all go down together, democrats and republicans. >> senator ritter? >> thank you, mr. chairman. thanks to all of our panelists. i know all of you agree that the

debt limit should be extended because disruption would occur otherwise. i understand that. i do think it is important to be precise about what we are talking about and what were not talking about. for instance, senator reid started his comments saying, if we default next week. i want to pick it up there. by default, we mean nonpayment or late payments on u.s. government securities is that right? does anybody disagree with that? that is what default means. in light of all of your testimony about the impact of that, would you all agree that if the debt limit were not extended immediately -- i understand that you think it should be -- if it were not, those payments should be top priority? does anyone disagree with that? >> senator, i would respond this way.

i don't disagree with what you are saying, but the premise is that there are other payments that will not be made. i refer to what i said. the effect on confidence in the treasury markets will be significant, even if we are paying off those treasury securities. even if we don't have a late payment of principal, even if we keep our interest rate payments current, if we are failing and choosing in picking what other obligations the country has, that will be felt in the market even though you could say, well, those securities are not in default. >> i'm not trying to trivialize this scenario, but i'm trying to be more precise. i think there has been a lot of loose language that actually is causing more premature disruption than necessary. would anyone not prioritize those payments?

>> senator, what we have been told by the treasury department is that they don't have the operational capability to prioritize. i think they make something like 4 million payments a day. there is a question if they can prioritize on that trip the other point i would make is it , is not clear what revenues are coming in. treasury tries to estimate. observers try to estimate. on the 17th, you have about $129 billion in a t bills coming due. the next week, about $93 billion in t-bills. the following week, principal and interest payment on bonds. every week thereafter. the point i would make is, perhaps they could figure out how to do it operationally -- i don't know their systems, but that is what they tell us -- but there is a lot of debt coming due. some can be rolled, some can't be rolled.

because it would breach the debt limit. it does create quite a -- >> treasury has two systems. one is for payments on security obligations. one is for everything else. i think your comment is accurate about the second system for everything else, but there is a separate system for payments on security obligations. i don't think there is any question that they can pay those first if they want to. i'm just suggesting that in a bad scenario, that should be a priority. it can be a priority operationally. if it were, those would be paid. i don't think there is any question about revenue coming in to cover it. for instance, martin feldstein has said "there really is no need for a default on the debt, even if the debt ceiling is not raised later this month. the u.s. government collects enough in taxes each month to

finance interest on the debt." again, i'm not trying to trivialize this scenario, but i do think it is important to talk precisely about we are -- about what we are talking about. i don't think it is accurate to talk about if we default next week. i don't think there's any need, any chance of defaulting next week. does anybody disagree with that, defaulting on payments on government securities? >> senator, i agree with you. however, let me tell you what is happening at the street level. the confidence of our buyers and sellers is waning very rapidly. we have transactions canceling right now. we have people not being able to get loans. we can't get beyond where we are at. it is going to go backwards very fast. yes, you could probably mechanically do all of this, but

the confidence of the american people is going to be really in the toilet. i'm sorry. >> mr. thomas, let me pick up on another comment of yours. in your testimony, you sort of bemoaned this episode in 2011 over the debt limit. you said it was very disruptive. as senator crapo pointed out, that episode led to the bca, the only spending and debt cuts in the recent past. do you consider that positive outweighed by the episode? >> if nothing else would have happened after that, then yes, i would agree with you. if we didn't have to come up to it and still have the same outcome by negotiating separately and got to the same point, then we wouldn't have had

a fall off of the confidence. >> i can guarantee you as somebody who was here in participating that that would not have happened but for the deadline of the debt limit. no way, no how. i mean it wouldn't have happened. underscore to senator crapo's comment. there was a distinct positive coming out of that, which is the only progress we've made on spending and debt in the recent past. >> senator menendez? >> thank you, mr. chairman. i almost think we are in a surreal conversation. let me asked the first question. understanding your collective concerns on the question of debt, is there any member of the panel who advocates as a way of reducing debt defaulting on the nation's fullface and credit? all right.

secondly when we talk about this , concept of prioritizing, think americans should understand that that suggestion would mean that we would make sure we pay china, japan, brazil, but we would not maybe get to paying americans who rely on social security or medicare. as well as the concept that for anyone who is a banker or anyone who works under the concept that if i make a loan, we will make a payment or not. the consequences that flow from that are inevitable. finally, to suggest that the way to reduce debt was the budget

control act, which i voted against because i did not see the willingness to include revenue as well as spending cuts i believe both must be achieved but to have across the board cuts that the chairman of the joint chiefs of staff says if it continues will threaten the ability of the defense department to meet the challenges globally on multiple fronts, that really means that threatens the national security of the united dates. -- of the united states. my colleagues go back home to their home states and rail against the consequences of sequester, even as they vote for it here. it is surreal. my question is, governor keating, you mentioned in your testimony -- i think this is an important point to realize -- if

you could give us a sense again, just the potential for default, not the default itself, but the potential for default actively cost taxpayers money. by waiting until the last minute to act and threatening to default, they caused investors and u.s. treasury securities to demand higher interest rates. i'm going to look at greater risk and i'm going to demand higher interest rates to offset the risk. is it right that i read in your testimony that, as a result of what happened in 2011, that it cost us $1.3 billion in fiscal year 2011? >> the bipartisan policy center's estimate was a $20 billion figure as a result of coming to the edge of the cliff

and stepping back. >> over the course of 10 years. >> if you stepped over the cliff, the impact would have been and will be obviously far more uncertain, but most likely far more catastrophic. $20 billion just for moving up to the deadline and not crossing over it. >> $20 billion. i don't understand how it is fiscally responsible for those who are driven fiscally to suggest that having the nation cost $20 billion and waiting until the last minute to meet its obligations is fiscally responsible. i also want to ask mr. benson -- i understand a large share of the financial markets use treasuries as a benchmark for evaluation and pricing or as

collateral in a wide variety of transactions. how would a default affect the market functionality in these basic areas? >> there are two things that you raised. treasury securities are a reference security. mortgages, credit cards, auto loans, pricing on swaps. it used across the financial sector both in the institutional or consumer also market. if you are affecting prices of treasuries, particularly short- term treasuries, you will affect the prices of those instruments. that will pass through to the end users of those instruments. the second point would be that these repos used not just in financial markets between financial institutions, but for instance, municipal issuers -- when they do their initial pricing debt offering, they will often use repose to invest their money before they put that money

to work, whether it is building a road or hospital -- again, it is used across the financial system quite a bit. they would be affected by the price and risk. over the long-term, there would be concerns about counterparty risk. >> thank you, mr. chairman. >> mr. chairman, thank you. thanks for holding this hearing. to the ranking member and to this panel, thank you very much for taking the time to be here today. i think this is as critical of the hearing as we could have at this date and time. i was listening to an economist on tv this morning. he talked about a lack of humility, honesty, and civility. he wasn't talking about congress. he should have been. he could have been. i watch what is going on here in washington, d.c., and i think we do need a humble, civil, honest conversation about why we are here. we are here because we haven't passed a budget in washington, d.c. in five years.

that is why we are having this conversation. we haven't passed an appropriations bill, not a single appropriations bill, in five years. i haven't been here that long, but boy, i certainly haven't seen this process move. we now think cr's are the norm. a continuing resolution is the norm. i have staffers who have been here long enough who tell me and have told me that this place would freak out under those scenarios years ago, but there are a lot of people who haven't been here since last time we actually passed a budget or past appropriations. that's why we are here. we don't budget. we have no financial responsibility. i'm not telling you something you don't already know. we are $17 trillion in debt. in we want to add another $1 trillion to it?

that is why we are here, because we think $1.1 trillion is ok. it doesn't end there. we are in other $30 trillion to $50 trillion in unfunded liabilities. that is why we are here. that is why we're having this conversation because we cannot control ourselves. we cannot control that. i think that is a very honest conversation that this committee and this congress needs to have. we go back to nevada, and that is hurting. i don't know that i have to tell you this, but we are highest in unemployment. everybody has heard me say this highest in bankruptcy, highest in foreclosures. we are in tough shape. i just got a letter from the governor, and i think some of you may know this, he was talking about how tough the shutdown will be for the state of nevada, programs like child nutrition programs, unemployment insurance, dozens of other programs.

he says, this undermines the economic security of nevadans. i agree with that. a default, that is due to a shutdown -- default brick -- a default would make matters even worse. i'm concerned. i'm concerned about the direction of this country and the effect it has on my own state. if i can ask the governor a question, you said that when you were governor -- i hope it is fair to say you did a good job you said you had both houses with democrats of the time. under what circumstances did you tell the leaders to the other party that you wouldn't negotiate or would not come from -- or would not compromise? what were the scenarios of -- that you had that would make you say that?

>> my grandfather was congressman at-large from illinois, democrat. in oklahoma when i was in the house and senate, republicans sought us out with slides on sunday night. as governor, the legislation was overwhelmingly democrat, but i had oklahoma state examine what we report, and they said, workers comp is too expensive, the kids don't take hard enough courses in school, you have a personal and corporate income tax. you need to address that. i sat down with the pro tem and the speaker and said, here it is. this is in the heritage foundation. we went through every one of those things, even a right to work vote in the constitution, and got it all done together. because as i said if we crash , and burn, texas would laugh at us. [laughter] who in the world wants that to happen? i don't think the analogy to the federal government is misplaced.

>> mr. stevens, you talked about compromise -- i'm sorry, confidence. i want to stick to confidence for a minute. what sense does it make to raise the debt ceiling if you have to do so without any structural changes to this government? would you have confidence with just raising the debt ceiling? >> i think there has to be high serious about both of them. in the near term, there is a need to do with that because it would be a hugely self-inflicted wound, but there needs to be promptly attention to the longer problem. as i said, they are linked in terms of what creates and builds confidence. millions of people and thousands of institutions we turn to to help finance the united states. >> mr. chairman, thanks for allowing me to vent some of my frustration. >> senator brown? >> i was in the house of representatives a dozen years ago with congressman benson and others when we got to a balanced budget with a budget surplus.

look what happened in 2001, 2002. an unpaid for more. -- an unpaid for war. tax cuts that went to the wealthiest people in this country. medicare benefits that were, shall i say, generous to the health insurance companies. this budget surplus, the largest surplus in history went to the largest deficit in history. lectures about spending, when some of us opposed those actions, is not necessarily welcome, but more importantly, never during that time did any of us say, if you don't stop this war, or if you don't to this, we will shut the government down or we are and not going to honor our debts and obligations. i appreciate senator heller saying we need to do some of both, but first, we need to pay our bills. this isn't accruing more bills. it is paying the things -- it is the american way, you pay your bills.

it is so clear. let me talk about one issue in particular. i was downstairs two hours ago listening to secretary lu on the finance committee. he said, "every thursday we rollover approximately $100 billion 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 entire balance." it is really like -- when i asked him about it this morning, it would put us in a situation where we are a homeowner one- month quest to pay the entire mortgage off instead of the monthly payment. mr. thomas is the one not in the most vigorously.

effectively, the u.s. government could face the same kind of funding crunch lehman brothers had in 2008. this discussion of uncertainty and the uncertainty in our economy has always been there to a point, but never is endemic or penetrating as this uncertainty we are facing this week and next week. talk to me about this uncertainty. what do you think will happen if there is debate on the 17th and all of that -- it is a thursday, and it is possible we could experience something the secretary alluded to -- what you think will happen, or do we throw up our hands and really just not know what will happen come thursday when this $100 billion is rolled over, connected or not to the actual debt ceiling? mr. stevens, do you want to start? >> i appreciate all the contingency planning and analysis that has gone into the what if's. we should all be aware, we are on terra incognito.

we really don't know what the impact would be. there will be lots of individuals and rushed decision makers -- individual decision- makers. that assumes, frankly, if fairly short duration default, if you will, or whatever the temporary measures are that are taken to avoid a technical default. if we entertain this idea over a longer period, there is no question that it would be cataclysmic. >> thank you. mr. thomas? >> i think the problem is, even if we went right up to the precipice and came to an agreement, the problem is, to me, it is like a lender lending to my company, and i come up to the deadline of the payment and

say, i'm not sure if i can make it or not. i will let you know by next thursday. then i do it again two years later. eventually, they're going to say, i'm not sure i want to continue to lend to you. that is the problem we have. i think in any future, the rates have to go up. there is no doubt in my mind. >> a couple things i would say, senator. we already know. we have an." -- we have in." evidence -- we have them here: -- we have empirical evidence.

that is in the pricing of the auction earlier this week. that is what is going on in the repo market right now. certain investors moving out of short treasuries. that is what is going on and other funds that are moving out of what they believe will be affected coupons. we already know what is going to happen, at least in the short run. even with all the contingency planning my members are doing, we can do contingency planning. we can think what we know is good to happen. but we don't know. we will have to work our way through it. we know we have deadline set the asian markets opening and what the reaction will be there. we don't know >> >> what we don't know. >> thank you. governor keating? >> who knows? i would say, accurately -- empiracally, the market went up. they were saying, people are working together. no default. if we do default, for a time, there will be an attitude on the part of markets and banks, well, they will fix it. so it is not going to be that bad. then we get to our argentina moment, our cameroon moment, our venezuela moment which could very definitely happen if people conclude that this whole thing is a train wreck and they are not going to fix it. >> mr. stevens, i didn't take

high school latin, but i know terra incognito is a place we don't want to be. [laughter] >> senator moran? >> perhaps because we are working so little on the senate floor, we are having a debate about the senate -- the debt ceiling increase here in the committee. i think what you are getting from us is a number of statements testing the waters, telling how we feel, and trying to find some common ground to follow -- to solve a problem. let me pose this issue. i hate where we are. i like certainty. this makes me uncomfortable. we often complain about the uncertainty in the economy that government provides. my guess is that your folks that represent your industry has been in my office and spoke about the uncertainty of the tax code, the regulatory environment. we know it is damaging to business, which means it is damaging to job creation. this is one more instance of more uncertainty. this is not a good place to be.

i understand that. i think the deficit and the debt is a defining issue for my generation. i think i have an obligation to my kids and grandkids and americans i have never met something during my time in congress to get us on a path that lends itself where we are working to balancing the budget. i don't expect it to happen overnight, but i want to know there is a path that we are following that lends itself towards a brighter future for future generations of americans. the issue that i face in trying to resolve how we come to resolve this is, what moments of leverage do we ever have in congress? what is the moment in which we are so worried that texas is going to laugh at us that we do something? we don't do things unless there is this moment that we come together, fearing more dramatic consequences, to force us to do things that apparently we are never willing to do on our own.

we ought not be having this debate about raising the debt ceiling. except, we never have a serious debate or any resolution of how we solve our deficit problem in the absence of these moments. do you have some suggestions, any belief that congress and the president will actually deal with this other issue? if your advice to me and us is, raise the debt ceiling, ok, what is your advice to me about getting something done about the deficit that is not just prolonging? i think what we are talking about here is -- we are demonstrating our willingness to pay our bills when we raise the debt ceiling, but we are doing nothing about our ability to pay our debts when we do that. how do we do both, how do we demonstrate we are willing to pay our bills, but in the longer term, we demonstrate we have the ability to pay our bills?

do you want to indict congress and the president to respond to that? it is the frustration i have. if we are never going to come together and solve the deficit problem, unless we have a crisis, and do you have to take advantage of the crisis? what do you do? >> everybody is flipping coins to see who takes that first. senator, if we raise the debt ceiling and six weeks we are back at it again, and six years we are back at it again, this will never be resolved sensibly, intelligently, patriotically unless and until, with the president's leadership and the goodwill of everyone in this room, democrats and republicans alike, and recognize that in the year 2025, our latest estimate, every cent of federal tax revenue will go to social

security, medicare, and medicaid, and interest on the debt that is -- on the debt. it is an actuary ok's. -- it is the actuarial tables. to tie in the debt ceiling with some kind of long-term reduction in a long-term liability of the country is the only way to go. how'd you do that? bringing together men and women of goodwill, everybody in the congress. i really believe that. as an american citizen under the leadership of the president, shut the door, sit around the table and say, ok, this is what we've got to do. here is the plan going forward. the ideas i've heard from both sides of the aisle, whether it is chained cpi or a link to the index on social security, all of that makes good sense. it has been presented to this body in the house and the public at large in a bipartisan way. it can't be that difficult. >> i would say very quickly. you raise a very serious political question. we are not political scientists

i guess. it is a difficult question. what i would say is, today, the united states is not greece. we are not italy. we are not in a situation, why we do have a series that , no serious debt problems question about it, we are able to access the credit markets because of an understanding of our ability to repay, the strength of our underlying economy, the fundamentals of the nation's economy. we want to avoid getting into a situation down the road that would put us in a situation like greece or other countries who either have to pay a tremendous premium on their debt or can't sell their debt whatsoever. we obviously don't want to get that situation. again, that's where i go back to my comment with senator crapo -- we don't want to impair our ability today to fix our problems for tomorrow.

we don't want to get to those problems tomorrow. let's not create any more difficulty today. i grant you it is a difficult political question you are faced with. >> i'm not sure it is a political question. there is a moral question. there is an issue that is really important to the future of our country. at what point in time do you get the leverage to force us to do things that cause us to come together and do things that not all of us want to do? >> senator christer? >> >> thank you, mr. chairman. and little editorial comment. i can't tell you how many times in the state legislature and -- i've heard to raise -- i've heard folks say when i look he run government like a business. at my own farm, i asked myself, what i do this to my own farm? the answer to that is

resoundingly no. i think it is important for everybody to understand -- i don't think there is anybody comfortable with where we are at debt-wise in this country, democrat or republican. there are ways we can address it, but not this way. not being held hostage. i think there are ways to do it through the budget process, which, by the way, has been particularly frustrating. there has been a minority that has held up the ability to go to a budget conference. quite frankly, the majority needs to speak at some point. i'm not talking about democrats or republicans. i'm talking about a majority in this body that needs to speak to stop this kind of craziness. let's get down to real life. agriculture is pretty big and oklahoma -- pretty big in oklahoma. operating loans are a pretty common thing. if we default, can you tell me what the impact will be on somebody going to get a loan?

>> we still have to beat. -- we still have two each. -- we still haveto eat. hopefully the lending will be available in the borrowing will be available. any time there is the chill, the panic of uncertainty, there is a pullback. there will be a pullback. we will all scramble around to try to do the best we can to find quality borrowers and quality lenders. you will have commercial activity. in the act particularly, as you well know, there is a real linkage between what happens in washington and what happens on your farm or ranch. we have to be sensitive to that. those of us who are conservative who say this government is too big and out of control, fine, but it is reality of the marketplace right now. whether it is a veterans benefits or social security or medicare or medicaid reimbursement or in the act space, hummers will not function

ag space, congress will not function ag space efficiently and well in a climate of uncertainty. it just simply won't happen. >> ok. senator warner talked about state and local governments. i've only got a couple minutes. i will throw to anybody who wants to answer it. if you thought about this issue, could you give me an idea on how a default might impact local and state governments? >> senator, i would say one thing in particular that could be of concern -- state and local governments that have refunded outstanding debt, municipal or state that, and using a treasury ask her, they already suffering right now because the market has been closed down in terms of extraordinary members. -- of extraordinary measures.

that means their escrows are not as efficient as that might be. the other thing that could happen is if an escrow is affected by a security, a treasury security that is deemed non eligible collateral, then the state or local government would be on the hook to make up any other shortfall in that escrow. there could be a cash effect to state and local governments, depending on how their escrow is structured. the only other thing i would say, among the largest holders of treasury securities are banks of all shapes and sizes. if you affect the liquidity operations of the bank and their ability to pledge those securities, that is going to affect their ability to put money out on the street. it may be far down the road, and it could be short, but they ultimately are affected across the system. >> thanks. i think i will just close it out

right there. i would say this -- we have seen the worst recession since the 1930s. you guys felt it. it in gary thomas felt the housing industry in a big way. it would seem to me that certainty and predict ability and confidence are huge if we are going to talk about growing this government and growing the tax revenue that comes around that growth, and i just want to say, i appreciate you guys standing up and telling it like it is very much. i certainly appreciate you being here today. thanks, guys. >> senator berkeley? >> thank you, all of you, for your testimony. mr. thomas, your testimony laid out a 1% increase in real estate rates could have a dramatic impact. a lot fewer homes sold, a lot higher payments per month, i think it was $120 more per month more, a decrease of 700,000 jobs.

that is just in the real estate market. that is a pretty significant part of our economy, home construction and home sales. could one anticipate that there will be less revenue coming from that sector of the economy into the federal government if we continue on this path? >> absolutely. you would have less revenue coming into the federal government as well as the state governments. you are not going to have the same revenue base because of that. this is 1% rate increase just because of this. it does not encrypt -- considering the rate increases we will have over time, which we will have. this is a bump in the rates immediately because of the crisis. it is going to have a detrimental effect on the housing industry, which

obviously has a detrimental effect on the overall economy. >> is it reasonable to assume that other sectors of the economy -- for example, car sales, highest interest rates on car loans. car lots would make less money, pay less in taxes, and people would be paying more a lot -- paying more for that purchase? >> absolutely, because if you -- if you raised the payments you have to make, whether it is rolling over an existing loan or purchasing a new home, it is that much less that they can spend on other items. cars, groceries, gas, you name it. that impacts all of it. >> it really seems like the path we are on right now is the equivalent to creating a huge tax on the american economy, one that really hurts families across the board, hurts businesses, hurts employment,

and yet, we get nothing productive. you have tax revenue that can do something valuable, build infrastructure, and in this case, it is like taxing families with no value. >> we need to keep the economic growth that we are seeing right now intact and continue to grow. if we don't, we are going to fall backwards rapidly. >> i really hope this point gets through to all of the colleagues on capitol hill of how this impacts ordinary working families. when there is this sort of dysfunction here in this square mile of capitol hill how people , across america are hurt. i want to turn to an issue which is the potential impact on tier one capital that occurs if treasury bonds basically dropped in value because interest rates

increase. is that a concern of the industry? >> it certainly is. it is very much a concern among the community banks out there. whether it is oregon or massachusetts or oklahoma, whatever the state might be, there are only so many places you can go to make up for the lost opportunity that the diminished value of the securities that you hold make you face. i know my grandfather in illinois is a community bank or. he had everybody in town on his board. if he had to go out and get money quickly from some other source, if people needed to know where salem, illinois was, he would be very hard-pressed. this could create real issues for the community banking environment. >> my time is running out. i will note concern about the impact on repurchase agreements or repo lending that is very

important to many institutions. it sounds to me like the path we are on can decrease revenues and raise costs. families can lose their job, may be more likely to need food stamps, for example. isn't it possible that in the name of reducing the deficit, this path could increase the deficit? is that possible? would it be fair to me -- for me to call that extraordinarily wrongheaded? thank you, i'm out of time. >> senator warren? >> thank you, mr. chairman. i appreciate your being here today. mr. keating, i read your article in "the washington post," that

using the debt ceiling as leverage is unwise and dangerous. you also noted that the respect and admiration of the united states and its institutions inspire around the world are based on the certainty that when our nation makes a promise, we keep it. i take it from what i've heard here today that all of you agree with that same sentiment. i've read yours, mr. benson, that it is on acceptable for congress to either voluntarily default on the debt and a continual short-term extension of the debt limit increase is unnecessary market uncertainty and raises questions about our nation's credit worthiness. i think we're all on the same page here. i agree. i think that makes sense. here's my question. if the very prospect of the default costs us money and our good name, i don't understand why we keep voluntarily raising the prospect of default with all of these votes on the debt limit. congress already controls the

size of the debt. it gets to decide how much the government taxes and how much it spends. don't you think would be better if congress replaces the arbitrary debt limit with the commitment that treasury can borrow exactly as much as it needs to pay our bills? >> the issue of how you change the process, if you change the process, will have to be resolved between you and your colleagues. there are probably many different approaches that make sense. i think what we are saying is, when it is all said and done, whether you scrap the debt ceiling process as it exists now, if you go to another structure or system, if you include or don't include the president in the process, then fine. just get it fixed. i don't know what the very best solution would be. i think it is very important to

look for a solution, that we don't do this every year, every two years. >> i think we are in the same place. we can't do this every year, every two years, every six weeks. the very -- the very threat is costing us money. it is costing us our good name in the marketplace. the way we stopped doing that, it seems to me, is to take responsibility for these debts. does that make sense? >> you are right. there are debts. you have to pay them eventually. >> does anybody disagree with that? >> senator, i would just say that so much of our spending is on autopilot already. if you look at the next 10 years, mandatory spending, which doesn't get a vote in the congress, is 61% of outlays. interest on the federal debt is 11%. that is about three quarters of all of our spending. my worry is, if there wasn't a gut check about increases in the

debt, that those numbers would simply get worse. if you sit down with your spouse and say, where are we, you've got to make a decision about whether you want the next credit card or the next purchase, because at some went, it gets unmanageable. >> you want some accountability in the system. it seems to me that accountability means that we want to reduce wasteful and unnecessary spending even if those votes are not clinically popular. accountability does not mean taking easy folds and grandstanding about whether or not we're are going to raise the debt limit. talk on the your importance of not voting over and over on raising the possibility that we are not

going to pay our debts as they come due. default is the economic equivalent of a nuclear bomb. thanks to this arbitrary debt limit, we are routinely on that bomb and watch with horror as the clock ticks down to zero. can do isinimum we pass a long-term debt ceiling increase as quickly as possible. i think we should take this option off of the table. the united states should honor its obligations and pay its bills in full and on time. anything else hurts our families and our businesses. thank you, mr. chairman. like to thank the chairman for holding this important hearing.

people inc.erican we are doing a good job. why would they believe anything we say about the consequences of the debt limit capital that is why it is so important that you participate. i am new to this business. i come from a dad who was a truck driver. he said when you are in a hole, stop digging. we shut down government, but unanimously in the house passed a solution who -- that says we not pay everyone who is working. do you know how absurd that is for people who had a huge natural disaster. . there we are representing now we are willing to take the greatest threat of all and jeopardize this economy, jeopardize this recovery. yourme here to this into

thoughts. i want to reiterate some of the things you have told us today. you said no amount of planning could take into consideration all possible consequences. planning could take into consideration all of the consequences. lessons cannot be unlearned. continue tot, if we do this, we will reap the whirlwind of the consequences of that. finally, more importantly, damages will be visited on america if we do that. body are people in this who are trying to find a way notard to say it does matter. it matters dramatically, not just to the livelihood and the political popularity of this group. that should be most irrelevant. -- shouldd be a rough

be relevant is the consequences on the american people. we are going to pick and choose our debts that we are going to pay. every american, when they look at their credit score -- when i wanted to buy a car, i looked at my car loan and pay it off my credit cards. i tell the bank? do not look at all those cards i have not paid. i always pay my bank loans. they know this is dysfunction that have to be addressed. i agree with my friends and my colleagues on the other side that we have a debt and deficit problem. anything who wants to ignore that is not looking at the facts. but we cannot do it. they want to negotiate. when have we heard this before? simpson, the supercommittee. we are not going to raise taxes

and touch entitlements. equal opportunity blame has led us to this point that we are not function the way we need to function on behalf of the american people. lots of great questions. i want to thank you and encourage you to continue to tell your story and continue to do what you are doing reiterated that we cannot let this happen. i do not want to be here saying i told you so. we want to stop this nonsense from happening. we want to abide by the full faith and credit of the american people because that is who we represent. not the american government. thank you so much. i knowe your good work there is no question there. i did not get a chance for an opening statement. i want to tell you how valuable

your work is and how important it is that you continue to sound the alarm. about people who are getting car loans for people who are retiring and people who want to finance a house and they cannot get approval because we are shut down. if they solve the rates raising, what is their chance? that is who we are here to represent, those farmers that senator tester talked about. voiceimportant that your get heard in the next couple of days. i am told that senator schumer is on his way. said that, gao has the cost of the recent financial crisis exceeds $13 trillion.

someone suggested default could be even worse. what would default mean for investors, including retirees? chairman, in the case of current investors, there was arrogant -- was a default and coupon payments were missed, immediately they would be out of money for some period of time. it is not clear if they would be paid accrued interest from the due date or the dates of actual payment. if they were not, they would have earnings associated with that. if they are holding treasury securities at this point in time and treasury securities move down in price, they would take a loss on that as well. it is fair to say that current investors would have negative

consequences. it will heard in some fashion everyone who saves, everyone who invests, and one who has a stake and not people in one category or another necessarily uniquely. it'll are saving for long-term purposes. are saving for long-term purposes. the effects will be long-term. >> senator schumer? .> thank you, mr. chairman i appreciate the courtesy that the committee extends. i want to thank you for holding want to thanknd i the witnesses. the most urgent threat to our economy is overall debt on debt limit.

we willin the long run have to make serious adjustments to our debt load. middle-class incomes are declining in america. is a greater follow in our debt. if it happens for another five or 10 years, it is a different america. i do not want to gainsay the importance of getting our deficit down. stevens, i heard you speak about confidence earlier. investors have confidence in the ability of the united states to pay its obligations. changes, it will make our situation worse. it will make the country less strong. one of the best ways to increase debtebt is to not pay our obligations, not pay our bills, plain and simple. the two are not unrelated. -- want to agree

with senator menendez. it is mind-boggling that we are even discussing this. i'm important purpose of this hearing is to deal with the debt important purpose of this hearing is to deal with the debt ceiling deniers. one group is confined to a small minority in the house who thinks default does not matter, that it is a lie created by the obama administration. commerce men brown from georgia said it does not matter. itcongressman brown said does not matter. he also said a third of what he learned in medical school was a lie. they think there is a magic solution that many members of this body have put forward as

a way out of our predicament. we can pick and choose which payments to make. if we prioritize, we can avoid default. i want to ask you to elaborate on prioritization and the effects it could have on the market. saidury secretary lew prioritization is default by another name. i agree with that. we have securities maturing between october 17 until the end of the month. 89 billion dollars on october 21. --rely on investors' ability -- $89 billion dollars billion on october 21. do after we have decided we will not repay some

of our creditors? think about the household that relies on financing on an ongoing basis. if the bank finds out the household is choosing to repay others,ts rather than it will charge a higher interest rate. the confidence of this market of lenders that we depend upon to finance debt at the level of $17 trillion will take a blow irrespective of which bills we choose to pay. never -- we have had an active decision made that we will pay some bills and not others. weit is not something that want to do. >> i yield back my time.

>> thank you to all of our witnesses for being here today. this hearing is adjourned. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2013]

>> on the next "washington we will discuss the government shutdown of 1996. after that, we will hear about the government shutdown impact across the country with reporters from state and local newspapers. we will take your calls e-mails and tweets. " everyday atournal 7:00 a.m. on c-span. "n this weekend's "newsmakers elliott ingle be our guest. the us-led raid in somalia and actions by russia and syria concerning chemical weapons. here is a brief look. has been a strategically important country to the united states for 30 or 40 years.

our mideast policy stance with having a good relationship with egypt's military and our military. when a government or a country with which you are allied does something you do not like, there are different ways of react ring than simply saying we are going to -- reacting than simply saying we are going to punish you. egypt.re two choices in there is the muslim brotherhood or the military. we are not going to have a western-style democracy any time in egypt. given how mr. morsi and the muslim brotherhood ran egypt, it is much more important and better to engage with the military than the muslim brotherhood. the white house is reluctant to say there was a coup in egypt . was it a cool? >

-- at coup? what would you call it? say?would >> i do not know if i would call it a coup. to administration is trying walk that middle path. they do not want to call it a coup. they do not want to condone it. what they did this week was to go down that middle path. middleree with what the path is. i think it is better to egypt to engage. if you call it a coup and cut off aid, you are cutting off your nose to spite your face. >> you can watch that interview with representative engel in new york -- of new york at 10:00

eastern and 6 p.m. on c-span. us what off by giving you saw with the press and the media and that world. how did you view them? hostility,with some which is a natural state of affairs between the white house and the press corps. that is just the nature of what the press needs to do. theed to try to attach white house out of what is going on. bolten tonightsh "q & a."n c-span's >> this was the primary residence of hoover.

to lu hoovercant because she was the one who designed it. we are lucky to have a lot of the original drawings or documents. influence came from her travels to the southwest of the as well as her travels in north africa. legacy.great she designed the house. she created it. it was inspired by her ideas. she had very close involvement in all aspects of the house's creation. lu hoover at lady 9:00 p.m.. next, democratic leaders

speaking to reporters about the house shutdown. a discharge position was brought meeting, which is a little more than 15 minutes. once again in the 12th day of the shutdown of government of the american people. the 12th day of having people , supposed to be paid, but not working for that pay. again, the republicans have refused to put on the floor legislation to open the people's government. we have had over 150 members sign a petition to open the government now and bring legislation to the floor to do that.

we had scores of members asking for unanimous consent of the body to do just that. so that the government could be open today. a point of order was just made. any member of the house would have been in order to ask for hr 59 to be put on the floor. we will discuss that at greater length. the american people want the government opened. they want us to talk. they want us to reach an agreement. they see no need. we see no need of having literally millions of people shut out of their workplace while the republican majority shuts down the government and tries to hold a gun at our head to agree on things that, in a democratic process, should be dealt with not at the point of a gun, but at the table of

conference, to which they have refused to go over the last five months. that me yield to my colleague tim cliburn. -- tim clyburn. >> here we are on day 12 of a government shutdown imposed on the american people by a series of manufactured crises. and today, we have witnessed attempts on behalf of this congress by the majority to shut off the pay and to keep the american forces they say they want to heal. the american people have made clear they want to see this brought into play.

this is what happens in a government process when we stymie the opposition, when we put off debate, and when we continue to teeter on disaster. it is time for us to reopen the government and let people go back to work and have the american people put at ease. with that, i would like to yield to our chair. >> i thank mr. clyburn. it is incredible what we are watching. just now, house democrats took to the floor and asked for unanimous consent to see if our colleagues would allow, without objecting, us to put on the floor a measure to reopen the government. even the request just to ask to

have this on the floor was shut down. i think the message is clear on the part of the representatives of so many of the millions of americans who do not understand why they cannot go to work, why we cannot let our economy move forward. he are simply saying, let america work. that's america' as it is vote to put america back to -- let america's representatives vote to put america back to work. we will not stop until we are allowed to put america back to work. that me yield to the vice- chairman of the democratic caucus. >> what we saw was the shutdown of democracy, of freedom, debate about the most important issue of funding our country right

now. this government is not operating. we were using our procedural motions to express our displeasure with the majority. they took their opportunity to shut down that debate as well. what has not been shut down -- we need to open up government working for all of the people of the united states. with that, i would like to turn it over to my colleague from new york, mr. israel. >> thank you. the republican leadership made a decision to in the session for the weekend. the government remains shut down. lands can take off carrying members back to districts. we continue to have uncertainty about what will happen to social

security benefits on monday. small businesses do not know when they open on monday whether they will be able to apply forsba -- for sba loans. those planes take off while the federal government remains shut down. that is fundamentally wrong. we saw in this discharge position -- position -- petition 100 80 governments -- 186 democrat sign to open this government now. 280 democrats stated they would support a vote on a clean government -- a clean vote to open this government now. no conditions. just open this government. there are 28 republicans who will get on that plane today and fly home and spend the rest of the week in their districts saying, i am one of the good guys. i am willing to vote for a clean budget. i hope when those constituents

see those republicans who claim they are willing to vote for a clean budget, they ask them, will you sign that discharge position -- petition when you get back on monday? will you put your people ahead of partisanship. they have the opportunity to do thank you, steve. every day that the shutdown goes on is another day that the country is hurting from this unnecessary action taken by the republican colleagues. are a majority of members of the house of representatives who want to vote to immediately government.ntire the speaker has refused to allow the house to work its will. fact, we just heard on the floor of the house that they

actually rigged the rules of the house, the change the rules of the house to deny the opportunity to any member of congress, republican or democrat to call up and vote on the law that would immediately open the federal government and this unnecessary this disruption would be ended. they're saying that only the republican leader eric cantor or his designee could call to open up the government. what kind of democracy is that when you know that there is a majority of republicans and democrats in this house today who want to open up the now, as chairman israel and others have said, we're going to give all our members an opportunity to show that they mean what they say, to show that here in congress they will do what they're are telling their constituents back home they will do. you have a majority, well over a majority who said that they want to do the peoples business and they want to immediately allow a vote to reopen the government.

.o we have a petition we get will do is if everybody who said they want to reopen the government right now to sign it, it is a petition to reopen the government now. .here are no more excuses i think republicans forgot why they shut down the government to begin with these days. but this is the opportunity to take action to get it open now. let's just be real. the speaker could walk onto the chamber today and get it done. let the people get it done. let's sign that petition. i hope everybody your serial will be asking those members of congress who publicly said they wanted to vote to reopen government right now whether they're going to sign a petition and do what they said they wanted to be do. and with that i want to introduce one of our traffic new members from the great state of new york who just signed a

petition to open government and is calling on all members of congress new and old. join us in doing that. grace meng of new york. right nowery happy just to sign the petition. we are a special classic came to congress to work on behalf of the american people. we want to cooperate with both sides of the aisle. we want to make sure that americans have more opportunities, more jobs and that our children are fed. we are disappointed and we -- andare pleased with we plea with republican leadership to end the shutdown. ioo.ve issues of concern, to we want to work on tax reform. the affordable health care act should not be a part of other

government functions are not. we plead with republican leaders and the 20 or 30 leaders who signaled that they would be supportive of this measure to reopen government and thank them. >> thank you all very much. as each of our members have said, we believe very strongly there are the votes that are been displayed publicly in terms of discussions with the press and with constituents, and there are the votes to open up government. as mr. ben holland said, they amended the rules just a few weeks ago so that only the , mr. cantor,er whose state is being very adversely affected by the shutdown and government to offer the motion to bring measure hr 59 to the floor. andica wants that to happen

they clearly indicated that in every poll. questions? >> have a question for congress in cowley. someone said you had inappropriately touched a staffer for mr. cantor. a b that has been blown out of proportion. i would like a statement. >> i had a few words with the young staff member of mr. cantor. i believe that his actions on the floor were out of line and not in keeping with the decor of the house. he agreed with me and he apologized and accepted his apology. clearly, the republicans are not happy with us continuing to say let's open the government. because they're not opening the government. and that frustration i think boiled over. andstaffer is a good person

there was an exchange of my staff members. i was not close by. mr. crowley said he thought that was inappropriate and glad to hear that staffer has apologized. the issue is we need to open the government for the american people, not get distracted by the fact that the government of the united states of america that serves the american people is shut down needlessly for political purposes only. 186 signatures. who what have you heard about how the plan might be changed? >> i have not talked to him, but the key word there is eventually. we need to open the government now. the president has indicated he is willing to talk. we are willing to talk heard mr.

ben holland for six months has been trying to go to a conference table to talk about these issues, but they don't need to be talked about while government is shut down. that is hurting america. it is hurting our national security. employees,government but it is hurting the millions and millions of americans who those employees serve. that is the issue. >> i'm not going to go into specific -- i'm not going to -- the issue is very clear. the american people think it is absurd and wrong and bad policy to be shutting down the government which costs us $300 million a day. while we are talking. they understand in a democracy you have differences of opinion and you talk through those differences of opinion and try to reach consensus. they also understand from their

own experiences that may take some time. what they don't believe is that you ought to shut down the government in the process. deirdre? [inaudible] >> i would tell you this. if they would announce that tomorrow morning we will convene to open up the government, i guarantee you that we would get every democrat tax year that was able to get back here. by that i mean that we have a couple of members sure ill, but >> >> [inaudible] >> we have been in session for 12 days and the government has been shut down. we are commanded over and over and over again this day, right now.

is a question of they amended the rules so only eric cantor, the majority leader of the house can put something on the floor to open up government. it eric cantor has indicated no willingness to do that. we are ready to do it tomorrow or monday. we want to do it now. thank you very much.

>> now senate democratic leader talking to reporters yesterday about the debt ceiling. this occurred shortly after the senate failed to advance a bill that would raise the debt limit through december 2014. the remarks lasted 20 minutes. >> this morning at 9:00 i met with senator mcconnell. the meeting was set up last night late. senator mcconnell indicated that senator alexander has a ranking member and the rules committee had worked for a number of years with senator schumer. i was current -- i was concerned that you knew that there were

--ferent republican office republican offers going around. the short of the story is he said i am representing senator mcconnell. later in the evening he asked if i would answer. -- if i would meet with senator schuman and senator mcconnell. i said yes. the conversations were extremely cordial but very preliminary of course. nothing conclusive. i hope that our talking give -- is some solace to the american people and to the world. this hasn't happened until now. senator mcconnell asked to meet with me. i was happy to do that or it they should be seen as something very positive. even though we do not have any thing done yet and we have a

long way to go before that will happen. that is a relative term. we're trying to figure out a way to go forward. susan collins is one my favorite senators, democrat or republican. the plan that she suggested and -- that's she suggested and that i have seen in writing is not going to go anyplace at this stage. there are two good things in it. number one, it opens the government. number two, extends the debt ceiling. other than that there is little agreement with us. i want to make sure that people here understand that we have some problems with that as does the white house with the collins plan as i explained to senator mcconnell and alexander, and

they are not doing us a favor by reopening the government. they are not doing us a favor by extending the debt ceiling. that is part of our job. that is why we have said open the government, let us pay our bills. we need to do that before we have any agreement on what goes on after that. this is not a concession. this is just us doing our jobs. this is four days away. i say that this is just us doing our job. this is four days away. i had a piece of legislation on the floor today to extend the debt ceiling for a year. it is hard for me to comprehend.

but every republican voted against it. this was a motion to proceed to the measure so we could debate it. if they had allowed us to vote cloture on this, we would have 30 hours to use it as he wanted to to see if we could come up with something. they just voted no. procedurally you know how it works. that is not easy to move forward. i cannot imagine why they did that. defaulting our debt would risk american jobs. not tens ofs, thousands not hundreds of thousands, millions of jobs. social security checks, medicare payments, even our military. people in theot house saying that is ok we can prioritize them.

there isn't a reasonable person in the economy anyplace that thinks that would work. we want to reopen the government , pay our bills so we can move forward as good faith negotiations on a long-term budget for it is with senator mcconnell and i are working on. >> people of america have seen this movie several times. the american damsel is tied to the tracks and the engine is bearing down. the question is whether or not congress at the last minute to come to the rescue and save this country. i think some of them have said ultimately they will work it out. i think there is reason to believe that ultimately we will work it out. let's be honest where we are. we saw today on the senate floor. sadt, we ended up with a outcome when it came to this vote. it is troubling to me that not a

single republican stepped up to start the debate on whether or not we avoid the debt ceiling default in just four days. not a single republican would step forward. some have said that we are looking forward to this vote to vote no. i do not understand her logic but that is what they said. before people give up hope, and hear the train whistle and wonder if this will end up in the right way, there are conversations going on with senators of both political parties. beyond what senator reid mentioned in his earlier meeting, there is an active conversation between republicans and democrats in the senate. why? we understand how important this is. we understand how much damage has been done to 800,000 furloughed federal employees.

we realize the potential damage to 300 million americans if we default on this debt. onlys been spelled out in those flattered economists who somehow flatter small handful of republicans, but they have told us in no uncertain terms that we are doing with increases with interest rates on everybody. and the reputation of the united states will be damaged anyway it -- will be damaged in a has never been damaged. that is why i believe these conversations are underway and must proceed. we're going to continue to open up these channels and find a way to deal with this. it is troubling. it is heartbreaking to think we have reached this point. we are motivated not by what is good for the nation but the fact that the house republicans have utterly failed in leadership in terms of coming forward to coming up with a solution.

now we have to except -- now we have to accept the responsibility. >> first i would like to say that we had a very good caucus today. democrats were unified. we are all united around the principles of paying our bills and opening the government. today breaks bad news and good news. the bad news is that the motion to proceed so that we could pay our bills failed because it did not get the 60 votes or bipartisan support we hope. this is playing with fire. we do not know when the markets will react to this. you can't say it will be no sooner than next thursday. i worry on monday that when the american markets open in, maybe because of this vote that they will start worrying and not only will the stock market go down and interest rate go up and value of the u.s. treasuries decline, it is very serious.

it would have been a whole lot better if we could put this aside and have 100 -- zero votes to pay our bills. it did not happen. the meeting that senator reed and i had with senator mcconnell call give me a little bit of a cause for optimism. clearly, the talks are in their very early stages. i believe senator mcconnell showed goodwill. i believe he wants to come to a solution. i believe he knows how serious it is to default. my view is that it will be the senate to that has to come to an

agreement here. the house republicans seem so divided and in some disarray. they do not have a plan. the hope is that at the end of the day, sooner rather than later, in a bipartisan way we can come together and take this burden off the shoulders of the american worker, family, and american economy by coming up with a fair and reasonable solution. we made clear that we do not regard it as a concession to open up the government. we do not regard it as a concession to say we want to pay our bills. that is our job. we should all be doing our job. and figuring out a way to stick to those principles and come up with a bipartisan agreement. i'm considerably more optimistic today than i am yesterday as a result of our meetings and a result of many other things that have happened.

we are all ready to roll up our sleeves and work to avoid this calamity. we are looking for our colleagues on the other side of the aisle to join us. >> here it is on a saturday when a lot of families are focused on football and what they will have for sunday morning brunch. we here in congress have a responsibility to make sure that they are not worried about their paychecks or about the economic future of this country or whether or not we are going to be able to work together. we stand here very strong to say we are willing to work together and we will pay our bills. it is extremely important to us. there are, stations going on -- there are conversations going on that are critical. we have to remember back to how

we got here. so we can work on the broader issues we have disagreements about. house republicans decided they were going to take the obamacare hostage and shut down a government which has not led bled to a pointw led where we are about not to pay our bills and hurt our economy. they have to stop asking for hostages in order for our family to be ok. as democrats, we stand ready to negotiate. none of us believe we will get our way at the end of the day. we should not be holding our country and our families and our communities hostage any longer. we asked house republicans to stand up, pass the continuing resolution before them, and then work with us on the challenges

in front of us. >> mr. reid, you have been very firm about what you will and will not accept in terms of this deal. he does not have much to deal. >> we should never have had the waste of time. be serious. he has problems. i have problems. that is how arrangements are made. this is a piece of legislation. we are working to come up with a compromise. we are not going to do that until the government reopens and there is a way to pay our bills. senator mcconnell and i have been in this body a long time. we have done things for a long time together. i know him. he knows me. we do not agree on everything. we were whips together a long time ago. we did some good wings together.

-- we have fond memories together. we revamped government together. this is what this is all about. if we have clinical scientist -- and we had a political scientist out there right now, this is a classic case of what this is all about. had too little of sitting down trying to work out problems. that is why are we are trying to work out right now. >> to what extent are you taking into account what the house of representatives can expect? >> i don't think that is my responsibility. i think that is senator mcconnell's. >> how'd you get the government to reopen? >> pass a resolution in a house that could pass just like that. we hope we can do that for a longer time. that would be a step in the right direction.

>> is saying more now would not how long would you like the debt limit to be. >> i would like the debt ceiling to be for 20 years. i would like the cr to be for 10 years. re. i amegotiating thei not locked in stone. we have to be very careful. we have this automatic sequestration that kicks in january 15. we have to take that into so any date consideration. , >> you want to resolve this before january 15? >> i would like to resolve it now. >> we have not done that yet.

when i say now i mean in the next 48 hours. >> are you willing to make any changes to the obamacare? interesting anybody how that is not part of the discussion anymore? a week ago tomorrow when the speaker was on national television, the talkshow, he started off on obamacare. that lasted about maybe 30 seconds. then he switched to spending. that is where he wanted to have a conversation. obamacare is no longer the number one issue. ir number one issue to do anything they can to divert attention from the full frame made of himself on obamacare. newton taking nothing off the table. mcconnell got a copy of that. we will talk about health care which includes obamacare. we are willing to talk about

anything. >> they want the medical device tax. since you do not consider raising the debt limit a concession, do republicans have to make a deal to get what they want? >> i appreciate your job to be as inquisitive as you need to be. i'm not going to negotiate with you folks. i have long since no longer negotiated with myself. thank you.

>> the senate is back in session today at 1:00 eastern time for general speeches. no legislative business is currently scheduled. live coverage of the senate can be seen on our continuing network c-span2. in a few moments, washington journal will be live with your phone calls in the days latest news. at 10 a.m. eastern, newsmakers with new york congressman eliot. he is a top democrat on the house of foreign affairs committee. >> tonight, part two of our

conversation with josh bolten. >> start out by giving us what with the press, the media and that world. how did you view them? >> usually with some hostility. it is just a natural state of affairs between the white house and the press corps, because that is the nature of what the press needs to do. they need to try to catch the white house out on whatever is going on. >> more with bush administration chief of staff josh bolten tonight at eight on c-span's "q&a." up next on washington journal, discussion with congressman martin frost and tom davis. they will talk about the shutdown and how compared to the 1996 shut down their expense while in office. after that we will hear about the impact the government shutdown is having across the country with various reporters from state and local newspapers. all that lesser calls come e-

mails and tweets, next on "washington journal." ♪ weeks into theo government shutdown with a where sunday session ahead in the u.s. senate, a deal on the continuing resolution and the impending debt ceiling remains elusive in the nation's capital. welcome to "washington journal." we will spend the first 45 minutes talking about the latest developments on capitol hill, the latest debate on the cr and impending raising of the debt limit. here is how to join the conversation, if you are a 881, foran, 202-585-3