in india oh geez i'm ready to believe the movie joins me the children's the on the violence the grief we go to the grand imperial. torturously to school until you can a letter to the most mature age of civility to go and. read this and the colonel was that you know as you're a treat. you know it will be a celebration for the american people everyone should be happy tomorrow about it we believe this is an opinion over their heads. a sigh of relief for some but not so fast mr speaker my first guest says the u.s. has to cut or earn twenty trillion dollars over the next decade to even start to get out of this mess so the us stands broke as a joke it's just doomed to death. and it's going to be seen actually treat. it's. a little bit infuriating. what about it is

embarrassing to think. that there's no grown ups. well that's the word on the street and we'll have plenty more of what americans think of the debt deal. the government's been done but what happens now everybody you meet thinks the united states fighting to the debt after months of bickering and the actress in washington exactly what kind of reception can the u.s. expect on the world stage. good afternoon it's monday august first four pm here in washington d.c. i'm lauren lyster and your watching our team well the country is approaching the deadline for raising the debt ceiling august second is tomorrow the u.s. is just a little more than one day old way from starting to default on its debt as. i'm

running out of money to pay its bills what some have said would amount to financial armageddon but loan the hole at the eleventh hour last night president obama and congressional leaders together with the mainstream media headlines threw up their hands and cheer we did it we have a deal. you know what will be should be a celebration for the american people everyone should be happy to morrow that it reads this is an over their heads. the debt ceiling is a done deal. so we do have a deal. but let us begin to begin with a deal finally reached to raise the debt ceiling. for days now people across the country have been saying stop it and work together. whether they're actually happy or just having a sigh of relief after all of this work that they at least have something to show for the standoff that has been the debt debate over the last few weeks and months

and of course i do want to remind you that nothing has been passed congress has not even voted on this plan we're awaiting that this evening now what exactly though is in this deal let's take a look at the nuts and bolts so this allows the debt ceiling to rise by least two point one trillion to as much as two point four trillion dollars now the deal comes in two stages but there would be no need to increase that limit again until after two thousand and thirteen that is of course after elections and the government can pay its bills through two thousand and twelve now with this deal it would give obama the ability to just four hundred billion dollars increase that ceiling immediately to pay those first bills and then an immediate nine hundred billion dollar increase to the debt ceiling in return for this about a trillion dollars in savings over the next ten years now the c.b. says this is actually about nine hundred seventeen billion dollars over ten years and these actually aren't really cuts they're caps on future discretionary spending so there's little bit of a difference over how people view those now the rest of the savings will come from

a joint bipartisan committee formed to identify an additional going point five trillion dollars in deficit reduction what someone call kicking the can now if this committee fails automatic cuts and acted on agency budgets splits. in the middle between domestic and defense spending would kick in and that's supposed to kind of give everybody a kick under the tush to get done a deal that is better than that but what is actually do let's look at the bigger picture remember nine hundred billion dollars in savings over ten years that's over ten years this is a little what it looks like can we bring that up ok so that is about a trillion dollars that is a football fields worth photocells worth of cash now that is what would be saved in about ten years it's also a little less than what our deficit is this year which right now is one point four trillion dollars so ok look that's a lot of money a whole football field but look at how indebted our country is look at this that's fifteen trillion dollars that is

a lot of football fields it's almost the size of the statue of liberty and it is what our national debt is approaching right now it's about fourteen point five trillion dollars now look at this see that building to the right it looks like a building that's actually not a building those are bills hundred dollar bills stacked up and that's one hundred fourteen trillion of them that is how much the u.s. does not have funded but has promised to programs like social security and medicare and military pensions now those were put together based on government figures and it's still a really have to bill but my next guest puts it even higher and he said in the past that the country is flat out bankrupt i want to see if he thinks that this deal means anything he's laurence kotlikoff he's economics professor at boston university thank you so much for being with us your muscles are ok so i know why you're ago you're writing in the country is bankrupt you have your own policy for prescriptions for how much need to be cut but first i'm just curious do you think

that you said last year that the country can no longer afford any kind of no pain all gain solutions is that the kind of solution this debt deal is. you know that's what this is this is a pretty much of a you know there's next for you that really haven't made any major changes in entitlements here and. you know obviously this will inflict some pain on some people but we need to do something much more massive than this we're talking about you know trying it our true fiscal picture and under control we need something like a twenty trillion dollar adjustment over ten years not a shoot to enter into a real just me every ten years now i use that you throw out that twenty trillion dollar number it's then pretty widely quoted now even when there was a big deal being hashed out by congress that was for a four trillion dollar deal so why is your projection over what needs to even be the beginning of a deal so much higher for we have two years what are we trying to balance what

works are we trying to balance and the idea here is what i'm saying is that we need to look at our long term expenditure obligations and compare them with our taxes and the difference is what we call the fiscal gap here promise that's about two hundred eleven trillion dollars large to close that we need to come up with about twenty two just are closing that if it down to zero we need to come up with about twenty billion rocks are going extinct so the budget balance is not really the right measure that we should be looking at raj's balance we should be looking at generational balance and you cheat to achieve generational balance you have to eliminate this fiscal gap so why do you think that people are looking at that bigger number there's been a lot of estimates for what unfunded liabilities are some analyses put that number at just about sixty trillion dollars as a usa today analysis did you put that number as you mentioned at two hundred and eleven trillion dollars why is your number so much higher and why aren't more people referring to this as the reality of the debt situation. well they're looking

at the cash flows and in the short run the baby boomers who are seventy million larger number haven't yet retired so the cash flows look relatively ok in the short run over the next ten years but they're if they are they go up well phyl so we're looking to short term that's part of the problem we need to have a long term fiscal plan here and just trying to get these casualties in grounds is not really working long term enough that's that's the basic problem you know the unfunded liabilities of so security and medicare and medicaid are going to go up by more than and two trillion this year the probably go up by four through so in just one year they're going to go up by four trillion is my sense so here we are trying to reduce expenditures by two trillion over ten years when the unfunded liabilities are going up by four trillion and when you think you have it on here we're looking at the wrong numbers well look at the raw numbers they get these are the numbers that politicians seem to be looking at and you're calling for

a more long term solution that needs a lot more cuts what we've seen in the last few weeks is a lot of debate holding up the debt ceiling over what is going to amount to nine hundred billion dollars over ten years straight away so if that's the only compromise that lawmakers can get to is what your calling for ever going to actually happen as a reality is that even possible. well it's going to have to happen because if we don't fix the things fundamentally the government's going to be forced to print lots and lots of money to pay these bills more and i wind up in high inflation if not hyper inflation so we have to come to grips with this reality we can't keep putting it off now what i'm proposing in terms of policy reforms i think is a lot simpler than a scene because we really need to do was for example on health care is a very body of basic plan and keep it at ten percent of g.d.p. the total expenditure that's what we're now spending we can just keep a lid on that you know ten percent of g.d.p. which is what's written spends on all its health care that would be fine going

forward so we can we have to rationalize these fiscal programs security health care the tax system and get to something that's efficient and it will work for search time and will eliminate this possible gap so there is a way to do this without a normal pain it's just that politicians are just and they're not ordering you know discussing that they're making points against each other that are saying you know game of who's right as opposed to let's let's focus on our kids real concern here is is where there are children it's not we're whether it's politician that politician is reelected or elected next year. so that what point is this actually be at issue that's unavoidable like what you're talking about because you mentioned you know it's that way they got right that's going to have to print money and print money to avoid if that's what the government's been doing i mean the federal reserve has shown its willingness to continue to put gas into the economy and to do

more rounds of quantitative easing i mean how long can that go why because right now it's going on like that. you know what i think of i've been up on traitors and bill gross from and cairo has decided to pull out of the us bond market if either and you're gone. traders suppliers in of china trade other conch countries are getting so efficiently nervous they really understand want term projections and they will start dumping our bonds and interest rates shoot up even though they have we have has been good to you it still won't be enough i mean i expect we'll get detoured downgraded by weeding companies if they're doing their job and a reason probably they get rated by substantially given a true picture you know we're just bouncing the wrong group since that simple but at what point does the true picture become the picture that everybody's looking at and that actually impacts the country the way that you're thing because for example yields on bonds are low they're two point seven five i believe today that's a pretty low interest rate that people are willing to pay on us debt even despite all of that yes. so that's remarkable that there's so much misperception

i think about it as realities of this country but it you know anybody can just look at the original budget office's june twenty second rejection of our long term finances and ask how much will this dead c.e.o. really change those projections a year from now and the answer is not much so in those projections are just renters so anybody's really looking long term and we have to look one term. i would see the reality of what we've got your it's really really good really really big but at the same time you know you've seen that m.p. come out saying that it may downgrade the u.s. debt and you're saying that it probably should but on the other hand so what if it does i mean other countries have been downgraded and they're still playing low interest rates on their debt japan being one example that has a really large debt burden so there have been examples that in to contradict what you're saying. well you know the u.s. you know. foreigners want to continue buying our paper and in us back goods and

services in exchange then they can do that for quite a while but at some point they're going to get tired of taking back arms and you know bonds and greenpeace is a currency in they're going to want to have something we don't exchange and i think their time is going to come so we you know there's no country in the world that can run a fiscal policy like this over the long term it's unsustainable it's just you know you look at argentina you can look at the whole history of any any third world country tries to be able it was it was up in the face of mentioning so we have to start analysing a long term fiscal budget we have to focus on generational balance not budget balance that's the key issue the fiscal gap of the country is chilling eleven trillion don't take my word from it just take a c b o o's june twenty second projection it will present a calculation it's that and we're that means as we need to cut spending either immediately permanently by forty percent raise taxes by about two thirds of the of

the permanent that's what these numbers are so i don't know that that happened are you are you really can start you seem you know this is your your policy analysis and you're an economist and you write about this but i really concerned you it is something that keeps you up at night. well you know you're just written a book called the totally screwed his father you know. it's i am true i'm really concerned about it and writing about this for or doing things now known as your situation keeps getting worse and the reason we had this crisis has to do something real people there is some sense out there at these numbers and i just don't believe that there is some fundamental problem and i'm saying that these guys haven't done their job they haven't worked hard enough they haven't focused on the real problem and they've keep the can down the road it's more kick the can down the road even despite this deal that we're seeing people tout in washington today maybe getting some reaction to your interview right now people texting or calling you know the

one thing on our team right now i want to thank you so much for being on our show that was laurence kotlikoff professor of economics at boston university and it's time now even though this bill has been touted by some as a deal the deal and have not been touted or praised by all at home no way a critic on the left say obama has surrendered critics have called it a republican ball street plan progressive lawmakers and the black caucus say they will oppose the deal and on the right tea partiers of course and congress over this did pass deals are expected to bring about another standoff today according to some analysts but what are the american people on the streets think main street who've been watching this play out all artes christine for that went out and she found out . private how long. not really i'm not i'm never surprised by congress and strangely isn't it all the congressional members are usually in that upper class to begin with so i guess just like they're unwilling to lower their own paychecks

their own willing to pay a little bit higher taxes and they'd rather put it on the rest of the american people the longer it goes to the far as i understand our credit rating is going to get worse is not surprising for our government to do something like that the debt ceiling argument went on too long they still going on too long i think it's kind of in various scene actually for our country and. a little bit infuriating they're talking about cutting a trillion dollars when they need to talk about cutting six or seven trillion dollars and they're haggling over the little stuff and it's ridiculous and it's politics and bureaucracy and it's very annoying to see our government run this while you have to compromise we decided that's a gun fight. and we send them there to do so well for american people i think it's fairly what i expected i mean it's sort of a negotiation but between two different sides so they play both take you know kind

of a. difficult stance initially and then they come together so i think you think it's maybe politics as usual yeah i think so yeah there's you know grown ups in washington you know. politics as usual and berra saying those are the feelings of people in the beltway who have been watching this go on on the streets average folks but beyond washington even though a default may be averted has the damage already been done to the u.s. reputation the world over the u.s. has dragged its feet over agreeing to pay bills that it's already promised remember this is money that's already been spent and then congress went back and said oh good we're not going to raise the debt ceiling in order to spend what we've already promised to spend now the debate in washington has put the aaa credit rating of the u.s. in danger as we've been talking about on this show and many others have and the u.s. is bonds are considered the risk free asset around the globe so all of this combined though it may seem in the beltway that a crisis can be avoided as reported i am makes the case the damage has already been

done beyond u.s. borders. and help us avoid default debt ceiling nation default and this crisis time's running out the entire world is watching it's been a public spectacle filled with bickering grandstanding and lack of compromise i divisive debate over raising the u.s. debt ceiling creative and unprecedented climate of uncertainty over america's so-called sound economy the damage being done no matter what happens now everybody really thinks the united states isn't so secure it isn't so safe even if the craziness subsides it seems to have got real close and who knows whether the next month next year this won't blow up again since the underlying causes economic problems are getting worse in this country for point five trillion dollars of america's borrowing is owed by foreign countries experts say washington's mismanagement may cause investors to abandon the devalued dollar and end their

partnership with america it's like being married to someone to serve a year for so many years they weren't sure you well know what'll i do how much can i put up with this relationship the u.s. will be in for a lot the only game in which the your community is making noises chinese making noises you know we're not alone now in our ability to be a repository for financing in the world the results could spark a replay of the two thousand and eight economic meltdown except this time washington not wall street would be responsible for the first time in history our country's aaa credit rating would be downgraded leaving investors around the world to wonder whether the united states is still a good bet. interest rates would skyrocket on credit cards on mortgages and on clora loans which amounts to a huge tax like on the american people as the countdown neared zero zero three big reading draw new movies fitch and standard and poor's threatened america's hollowed

triple. unless a deal with hammered out and that fourteen point three trillion dollar debt getting higher economists say america's unsustainable budget deficits are the biggest threat to the nation it's like the batteries worn out the spark plugs don't work the tires are flat all of this and so what we're trying to do is say we've got a little bit of money in the bank let's pay that debt down but we're not doing anything to fix the economy and so we're putting ourselves in a bigger and bigger hole not just because of the dad but really because we're not creating any way to get around the debt instead of the u.s. president repeatedly asked americans over the past week or two during the campaign to borrow and spend more make a phone call e-mail tweet keep the pressure on washington and we can get this all the eyes of the world's have been following the heated saga playing out between

u.s. politicians the main problem not going away is america's debt and the growing realisation that elected officials may never be capable of agreeing on how to solve it. r.t. new york so all of that given what is the view looking in from the outside on the united states and this debt debate joining us now with that perspective on the international fallout and what it could be if asia times correspondent pepe escobar now he's usually in brazil but we are so lucky to have him in new york right now hi pace i see you. there is severe you ok so i want to start because i've heard people like you say that these kind of shenanigans really cast a cloud on the u.s. reputation in the world but other people more mainstream people say this christine lagarde the new head of the i.m.f. is a more mainstream voice i think you could arguably say who is saying that the current crisis is probably chipping away at the positive bias towards u.s. treasury bills which of course is considered

a safe haven so is this the damage that this debate has already done to the u.s. reputation all over the world. well the damage is already done in fact look i spent the last to two months two and a half months across asia in all those the dispersed few weeks of people start seriously discussing the american that the chinese for instance they are in an awkward position because the the economies are totally interdependent they know that a lot of hot money is going to be in flux in china after this in the never ending bet ceiling debate which is not going to solve anything as the best american economists including paul krugman in a very very good new york times column has already warned if you read that believe that harvey's latest book which doesn't get a lot of traction in the u.s. but david harvey is read by the best mind and the brightest minds in europe and in

china for instance this is basically a real arrangement of capitalism of capitalism and the big tune is now being passed in china the problem is you know what how an organ that i think you just just to finish this how the ruling elites in the u.s. and india west in general the ruling atlanticist elites will organize or not organize or refuse to organize this specimen of the great and from wall street and from the financial system in us to china as a pillar of the world economy china for instance cannot have a financial system best. marti's courses of style as us otherwise the whole world economy will be pulled well in the same time no you know you or i can just go invest tons of money in china businesses can invest tons of money in china as stock market it's not open in

a same way so what is really the concern of china are now because from what i understand it's not like you know it could get a lot better than that how can that money are flowing to china. how what are they going to do with their surplus of american treasury bonds for instance they have been they versifying their reserves from dollars two euros and they are doing swap deals using the you weren't they like to trade it with the south americans of miracle for instance in their own currencies like the brazilian reality or the u. one itself they already buying oil from your own e.p. you once so are the only scape route that the chinese know of and they already wark in on their special mechanism inside the bank of china organizing this transition is to diversify their portfolios so the they're buying more urals their rules using more swaps with the countries currencies and the u.

one and they are logging heart inside the i.m.f. inside the g twenty and with inside the brics arrangement the five brics countries of which they are the natural leaders we can say for a basket of currencies whether until this happens and i will say this won't happen within the next five six to ten years realistically it's going to be an enormous debate in all views of the the american financial system and wall street in the washington establishment resistant to the core but that's the only way to go for the international monetary system to really work its healy's mean that's kind of chorus of in the chorus of that made appreciated by today that something that we've heard discussed a lot moving away from the dollar as a reserve currency and bric countries of course talking about that and economists like i said stiglitz but at what point does this become do you think if debt debate will factor into that conversation and that will move it along. look i don't see it let's see what happens in the next g.

twenty meeting for instance if the chinese are be very cautious about it for instance they have not antagonize the i.m.f. directly they could have put their own candidate for the i.m.f. two or three months ago in fact when lagasse the wince of the june she managed to convince the chinese in i would see two hours and they say look let's not pick this fight now let's wait and see what happens lagarde you know by herself although she is chicago wall street let's say she is an american player log on basically she's not a european player she's an atlanticist but with an american but by herself is not she's actually implement like so this wasn't a quarter of the york times saying let's be patient which is completely. redundant when you think about it so the chinese are picking this fight in the long run and with the help of the brics so if there is some modification of the international financial system it has to be engineered by the before largest brics brazil russia

india and china i think that is the one you know and i want to bring out what russian prime minister vladimir putin said he said that this country the u.s. is living in debt it is not living within its means shifting the weight of responsibility on other countries and in a way acting as a parasite is this the concern that you're talking about that china has and is this the characteristic concern of the brics countries. rather healing yes it is it is lawrence putting of course he's very blunt but he articulates what most people on the street level in most developed countries are actually thinking like you know this morning i was reading the brazilian argentine your reaction to the debate in washington and they are terrified because they look there's going to be an influx of our money here as well like in brazil the bourse and so on while it's raining dollars for months because you know can you imagine if you're an american investor you can put money in brazil and you get eleven percent interest rate what is that

what is the incentive to invest in the united states when you can go to south america one of the worst one of the largest countries in the world would have booming economy in you reek of bundle even a few bass if you wanted you know they said you know now have money given that we're people yes but it's going to mean that the united states will give all that and that means the much higher interest rate because then maybe that would get some of that you know upside of their higher interest rates to go back towards the u.s. . look. it's a conjunction of factors very complicated there's not going to be a default you what's going up default on the world economy because a westie fault is a global economy default as we stand this is not going to happen or busy so we're going to get some kind of deal with the last minute in washington between should be tomorrow for obvious reasons because if we don't it's our i gather everybody knows that the next step is how to reorganize the international financial system.

the influx of money is going to keep going to all these developing economies china brazil russians a certain extent to some of the southeast asian countries like i was in thailand the last week and there's an influx of money in southeast asia as our pilot in indonesia especially seeing a poor bourse the same scene so how to organize all this best of course is like we said before it's going to take years and meanwhile what happens the same thing american corporations will continue to do localize the american taxpayer and the american middle class in the american working class this will be the end of price and not be anything never seen her any time a time again and then years things kind of pan down to the workers but just we're almost out we're out of time i'm sorry i want to got to have a bit that's all we have to say because again. next time thank you so much for giving us your insight from asia and from the other.