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comcast support c-span is a public service along with these other television providers giving you a front row seat to democracy. >> a discussion about the economy and concerns about recession with wendy atul berg of the brookings institution she is the director of the hamilton project and a senior fellow, and also the former chief economist of the congressional budget office and served in that position from 2019 to 2020 good morning and thank you for joining us. guest: happy to be here. host: when it comes to the latest noons, can you put this in perspective what this letter means and particularly the discussion it will foster for the debt ceiling? guest: it's not good. the way to think about the debt ceiling is like this. the u.s. taxpayer owes people money. we owe investors money who have bought securities, we owe federal workers who have been working on behalf of u.s. taxpayers. we owe medicaid and medicare doctors money and we have obligations to people who expect to receive their social security benefits.

, we owe federal workers who have been working on behalf of u.s. taxpayers. we owe medicaid and medicare doctors money and we have obligations to people who expect to receive their social security benefits. these are obligations that are already in place because of loss that have previously been passed by congress. for a long time, the u.s. government has spent more than it has brought in and difference needs to evaluate -- be made up. congress tells the treasury ed has an obligation to make spending payments but at the same time and put a cap on the amount the treasury is allowed to borrow. those three things cannot hold at the same time.

we are in a position where we have hit the debt ceiling. the treasury's not allowed to borrow any more money. they are moving money around to pay the bills but it is now possible that by early june because of what has happened with revenues and they are not as strong as we had hoped, by early june, we will not have enough money. host: by june 1 it has to be made, biden wants them to have these discussions on capitol hill. what should the conversation center around? guest: they have to raise the debt ceiling. it is a no-brainer and most of the people who are involved in these decisions understand that. i think some people are getting for a crisis to see what would

happen and who would get the blame if the treasury had to juggle payments and some people did not get paid. at the same time, there are budget decisions that have to be made. congress has to make decisions about how much they want to appropriate for defense spending, nondefense spending. i am guessing those concessions will be wrapped up in debt ceiling conversations but they don't have time to make all of these decisions between now and june 1. my hope is the first thing they do when they get in the room is less raise the debt ceiling and commit to each other to make longer-term harder decisions on what we want spending to be over the next fiscal year. host: the democratic leaders of the house and senate, the house speaker has another perspective where he wants to see cuts in

spending before those things happen. guest: what is frustrating is that there a bunch of republican lawmakers to put forward bills or talked about the idea of having treasury commit to making interest payments or other kinds of payments. but telling them, we want you to postpone other payments. we want to see how things unfold at the debt ceiling -- it is dangerous, it is foolish. it's not good forhe. is not good for the federal budget. i am worried that not everyone involved in these negotiations actually has the protection of the credit rating of the u.s. government as highest priority. host: our guest us with us until

8:45. if you want to ask questions call on the lion's (202) 748-8000 free democrats, (202) 748-8001 four republicans,, (202) 748-8002. host: what is going on at the office now that they have received this news from the treasury? guest: they are looking at federal revenues and coming to the same determination that it may be in early june when the coffers run dry and they don't have enough money.

in some ways it's uncharted terror raise -- waters, sometimes not. host: as far as the treasury, what is the plan of what gets paid first? guest: they have not been forthcoming about that. if you look back at what they have done, what we have from previous go arounds it looks like there game plan will be making interest payments on this debt first and foremost so there there's no accent to which they would've defaulted, then they would make nondistressed payments until they delayed for

long enough that enough revenues come in that they can be sure they have enough money to make interest payments and they will make each day's non-payments when they have enough money. that way they don't have to prioritize between paying this federal contractor or this medicare provider. host: what is the current state of the u.s. economy? guest: we got information about what happened in the first quarter and consumers continue to spend. the information we got for cool -- she wasn't. parts of our economy are too

gloomy and one of the reasons we see inflation uncomfortably high the strength of consumer spending on its own contributed three percentage points. that is a strong economy in that regard and that is very strong spending. other parts of the academy -- economy help bring the gdp down. with regards to the consumer, the consumer still spends like gangbusters. in the second quarter things are slowing. consumer spending has bid out a torrid pace. we have come off highest from 2020 and 2021, particularly in

good spending. we need consumer spending to come down to. host: what are the boomy parts? guest: inflation remains high. information shows inflation the stuck up 5%. the primary reason why the fed has been taking the action it has been taking by raising interest rates. there are a lot of factors going in to those inflation numbers but one of those has been the strength of consumer spending and spending overall. in 2020, in the midst of the pandemic, our mix of consumer

spending. we stopped spending on services and went all into goods. good spending has come down but it is still weirdly high. if you draw a line where good spending should be, it's based on what we saw in the 2018, 2019. we are 5% above that level. if you are a seller in america selling goods to consumers, it is like christmas month in and month out. it's not possible for our economy to keep up with that level of demand. one of the reasons we are seeing the inflation numbers we are seeing is that sellers are facing demand they can't keep up with.

host: wendy edelberg joining us in this conversation. caller: thanks pedro. i appreciate your guest this morning. there is a quick way of putting this into perspective to what we are actually doing. when you talk about a 34 trillion national debt in consumer spending in the way i am seeing this. if you go back to the clinton administration, we left there with a 320 billion surplus. the cheney and bush administration, 750 bases around the planet, the resupplying of these institutions and we keep coming back to the national debt that even out a trillion

dollars, i don't see any consideration being able to pay off that national debt. what is the national debt at this point in time and what are we going to accomplish by putting the burden back on the american people? caller: we value a lot of things that the federal government does for us. guest: social security does a lot of good and is extraordinarily popular. the federal government as a central part of our health care system in a way that does a lot of good for a lot of people. the federal government helps to pay for schools. it helps to pay for abroad insurance system. as one of the reason why we weathered the pandemic as well as we did. we just need to pay for those things.

in my mind, we are an under taxed country. we have extraordinary resources that are available to pay for these goods and services that the government is doing for us that we value. host: from kentucky, this is jack. caller: i have a question. if congress can't pass the debt ceiling will that affect social security? guest: it may well. the game plan that is widely expected is that the treasury will make principal and interest payment so it's not in default on the debt but that it will postpone making other payments

until it has enough resources to make each day's payments without having to prioritize and that will mean delays and payments on social security benefits, paid to federal workers, pay to doctors who see medicare and medicaid patients. the way to think about it, if the federal government makes interest payments but puts -- delays making those other payments. we are talking and 25% cut in all of those other payments. a 25% cut in federal spending on social security recipients, those doctors expect to get. the cuss will be bigger an

amount over time if treasury wanted to make sure that it had enough money to make interest payments no matter what. let's be clear, if this day comes to pass and treasury is not making all of its payments, this is a crisis that will quickly mount in severity. as much as much as i can sit here and say if this persist we will see 25% cuts in those cuss will mount and payments will get increasingly delayed. i don't think this could last more than a handful of days before we see a big severe crisis in financial markets. host: we have people on twitter

asking about the law on the debt ceiling in the first place and if it comports with the fourth amendment. guest: i'm not a lawyer so i can offer a position on the fourth amendment. i will say it is stupid. the idea that we separately tell the u.s. treasury that they can expect to receive revenues based on tax law so we have passed. they have obligations to make payments because congress passes laws and they don't let the treasury decide legally to pay this or pay that. congress is telling the treasury you have to make the payments based on the laws we've made and you can't borrow to make those payments. it is a stupid thought. host: let's hear from james,

virginia, independent line. caller: good morning pedro. my question is, at the end of the month i don't have the money to pay my bills, it doesn't mean i get to write a balanced check. i can't print the money. it's in our laws. why doesn't the government have to follow any of the laws that we do? gm had to lay off a bunch of people because it has to save 2 billion dollars. disney is laying off people, our government creates these problems. you can go back to your archives how many times the government is going to shut down in the sky is going to fall. every year we hear the exact same thing.

spend less money. guest: i want to draw a stark distinction between the issues around the debt ceiling and a government shutdown. they are both stupid things that your federal government can do that they are very different. congress enacts laws that keep the government open. appropriation laws that tell agencies, you are obligated to do this that and the other and we have set aside money to make sure that you are funded to be able to do that. and then there is the issue of paying bills from past obligations. the issues on the debt ceiling, is paying bills for past obligations. congress still has laws in place

for this fiscal year saying this is what the federal government can do because congress has told the federal government it has to do the following things. treasury does not have the authority to willy-nilly say, i am going to shut down this agency. i will tell that defense group that they should not be working. i will save money by not paying those people. you don't want the treasury to have that ability. congress has that ability and it has told those agencies that they have to work. if the debt ceiling binds in the treasury's not able to pay the bills, it doesn't mean the government shuts down it just means that workers still get paid. host: the rate that have been

out there but the federal reserve has a meeting today and tomorrow. they are expecting another interest rate hike, tell us what could happen if the hike takes place. guest: i think it would be a huge shock to markets if the federal reserve did not raise interest rates by .25 percentage points. all eyes will be on what statement comes without information about forward guidance. does the fed hint that with the information that they have on hand this might be the end of hikes for a while? ed thinks there are one or two hikes left to come. they will leave themselves room in that statement because everything they have been doing has been dated dependent, not

just what they see in the economy but the financial system. for the most part when it comes to economic information, we have the same information the federal reserve has but it is safe to assume that they have information we do not have about what's happening in the financial and banking system. there will be a lot of attention with a hint of what is to come. host: what are the primary sources of information that they look to? guest: first and foremost they have been laser focused on inflation they are drilling down

a particular measures. there also focusing on what's happening in the real economy. the labor markets have been incredibly strong, unsustainably strong. if you look at what we know about population growth, long-term trends in labor force participation comparing that to the hiring we have seen. hiring is three times higher than is sustainable. the labor markets have to slow. i don't want to say it is math.

each piece of the information that the federal reserve is getting with the labor market, i know it is pouring over. one of the first places we see. we have seen what is happening in mortgage rates, people's ability to refinance their homes, they are looking broadly at the housing sector because it tells them about how healthy household balance sheets are. but also because it is the bellwether, with the effect has been of monetary policy and they can see if things are following

historical points. we can go through all the sectors one by one. host: wendy edelberg is head of the hamilton project, what is that? guest: you would think i would have a faster explanation. we work with academics and other experts around a wide variety of fields and we say you have studied this for a long time, you know all about this problem. let's work with you to come up with policy proposals you want to put in front of policymakers to fix the problem. we work with them mostly to help them get their best ideas in

front of policymakers so when they make decisions they have the most cutting edge and useful research in front of them. we do that with an eye towards making the economy stronger but also making sure that economic growth is widely shared. everything we are doing is through the lens of a strong economy but also an equitable economy. host: let's hear from mark in oklahoma. on the independent line. guest: i don't think i heard the question. caller: what about making cannabis legal and taxing it?

guest: there are many sources of potential tax revenue that the federal government could tax. you have highlighted one of them. i think it is one of many areas that should be on the list. host: let's go to florida, with francis on the democrat line. caller: a comment and a question. i am not real pleased. i am 70 years old. i think -- we talk about a budget. we should clean -- pass a clean debt ceiling, no one is going to

do a budget. i know what a budget is, i'm on disability. i know what i can spend on. this is not a budget this is a wish list. we just spend what we want and borrow to make up for it. and now we have 34 trillion in debt and nobody seems to think about how we will pay it. i can understand why they are worried now, something must be done. for the 50 years that i have been following this. i have never known the cbo to be

correct. guest: there is no compelling reason that the government spending should be constrained. there are lots of good reasons that the government should run a deficit. i know it's enticing that the government should run like a household. is not a very good comparison. most households do borrow for

the future but is not a good comparison. it is highly inappropriate that the government is borrowing. when congress does get together and pass budgets for the fiscal year puts put someplace tax policy that is set in law for several years. those are all the budget. it really is a budget. even when congress says this is the best you can do? even that's a budget. there is a ton of information on

the website of the accuracy of his projections. host: from maryland, on the republican line. caller: thanks for taking my call. you are clearly very intelligent and experienced anyone who pushes against the narrative will sound less intelligent. people are starting to wake up that this is an idea. we have the right to borrow more money. that is a fallacy. there is enough money that if we did enough prior to the station

-- prioritization. we absolutely should prioritize our payments. there is enough money coming in each month for us to pay the important things. for quite a while, we got payments covering the important parts. at what point do we say, enough is enough? sit down and create a proper budget. everyone is high on drugs with the stuff and our children and grandchildren will have to pay for it. the working people of this country don't receive bailouts. we are taking a hit. we don't have to bail the banks out. they can bail themselves out. guest: i entirely understand

your point. here's the thing. the suggestion that you are making that the treasury has enough money coming in from revenue. congress has not told the treasury how to prioritize that money and so the best the treasury can do, this is just a short-term solution to a set of bad outcomes. we will only make interest and principal payments and everything else is going to get cut by a third. what you have in mind, is you

want the treasury to make social security payments, defense contractors, there are two problems with that. the other parts of the budget that the treasury would not be making payments to are going to see substantial cuts. let's say we left to the side federal contractors, people doing contract work with the government. if you want to pay them, we make the bucket of money even smaller necessitating bigger cuts. these are obligations that we as tax owners own.

we don't want the treasury deciding who gets paid first and who gets paid maybe never. congress has the power of the purse and they say pay everyone whose obligations are due. you don't want them to decide who funds this agency and not that agency. we don't want it and is not legal. without a law in place telling congress to make this payment and not that payment, >> c-span d view of government, we are funded by these television companies and more including

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