i've had judgments placed against me and i can see how some people aren't comfortable putting themselves in in that position i choose to put myself in this position because i do have two beautiful children and one day they may need an abortion for whatever reason and i want to make sure that they have the right to be able to get this help and you decide what you think but that was decided today you don't often hear that was a personal story of dana weinstein she's national abortion federation she's with them for now for more on the stories we covered go to our t.v. dot com thanks for watching and have a great night. hey tom hartman here broadcasting live from washington d.c. coming up today on the big picture.

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chloe and welcome to cross talk i'm peter lavelle on the brink of bankruptcy time is running out for the american budget deficits failure to raise the debt ceiling could have catastrophic consequences not only for the u.s. but for the entire world piling on more debt and begin to solve america's fiscal woes. and you can. start. to discuss america's out of control debt situation i'm joined by martin henican hong kong he's an associate director at the tike group in cambridge we have jeffrey frankel is a professor of capital formation and growth at the harvard kennedy school and in new york we cross to joe weisenthal he is a deputy editor at the business insider all right gentlemen this is crosstalk that

means you can jump in anytime you want but first let's have a quick look at america's debt mess. going broke i go in for broke wanting stuff get asked unless a fourteen point three trillion dollar debt ceiling is lifted by need me on the line the course of the us is on a federal budget so courage in money lives public debt more than fourteen point two trillion dollars and rising by four wheel in dollars that a massive iou the next generation forty three cents every dollar we spend this year we borrowed against the future of our children the compromise a void it a us government shutdown with agreement on the largest single spending cut in u.s. history what thirty eight billion dollars nor change begins the size of the debt and last month the wealth largest bond trader said it was all out of us treasuries smile and trillion dollar deficits as far as i know skansen if some counter the

world's largest economy has to go for growth and even that isn't possible can it handle that but mounting criticism of the learned some strategy and spiraling prices for anything priced in the greenback underlying confidence in the u.s. dollar and the global economy that on the that if you're going to show up for across the artsy. ok. and i'm going to you first learned to read something to you the united states of america if we didn't have the gawler is the de facto reserve currency of the world we'd be greece i mean we're broke bankrupt really bankrupt and now we scam our treasury secretary james baker how do you reflect upon those words. well bill gross of us was saying that the u.s. is actually article reading the greeks because if you had all of the unfunded

liabilities to the national debt figure i mean the national debt figure. isn't really what this is really about but really the unfunded liabilities are the so-called fiscal there when that's two hundred two trillion u.s. dollars saw in many ways that's worse than greece the budget deficit is very small as the same as crazy a ten point eight percent budget deficit when the eurozone was formed not as a eurozone as any better i mean they're just blowing up right now to all we have to be seeing again pressure on greek and pigs government bonds and even germany and france are increasingly looking shaky on the government as well but just as a reference on the eurozone was frond there was a limit of three percent our budget deficit as a percentage of g.d.p. that is normally considered the maximum sustainable so the u.s. is now at ten point eight percent clearly as we have been warning they are beyond the point of no return and we don't really see that they could solve the problem in any other way ben then it's in our. estimate of the most analysts they agree greece

will have to do it basically some form of the default or dare the restructuring or very very high inflation in respect of currency to bed really out of this step saw we say stay out of the u.s. dollar stay out of any form of medium to long term u.s. treasuries but by the way also eurozone doesn't look better again saw the rest we are very optimistic on it ok jeffrey in cambridge i'm going to you is that too great of a picture there i mean the past the point of no return that's remarkable. well absolutely not and i'm not sure i heard that right there is there's no chance we're going to have a restructuring of the debt i mean we have a very serious long term debt problem we've had it for quite a while and it's long term in two ways one that the problem is that deficits the moment the problem is retirements and the rapidly increase in pensions and health spending medicare and social security that are going to come over the next few decades that's a problem it's also long term in the sense that we we've been facing this problem

for thirty years many people like myself have been worried about this for thirty years there's nothing magic about about this year the only thing that's magic about this here is it's become a political issue this year the american political system kind of bizarrely swings back and forth between not being concerned at all about the problem and making it much worse with huge tax cuts like we did in the early eighty's when james baker was working for ronald reagan or as we did in the bush administration versus times when all of a sudden we're concerned about it i've happy that i mean if we're concerned about it fine let's take advantage of that political crisis to solve the problem but if you look at. the willingness of foreigners to hold u.s. treasury securities there isn't the slightest sign that they that they're getting tired of it so to use the phrase. debt crisis is to my mind i'm sorry five years ago i don't feel it is better to read it as they have been crying a lot of people i bet you have because nobody has buying it. ok and you know just

telling us to look at sawyer why lots of other china is buying it and we know i mean it isn't just the u.s. federal reserve lots of other central banks like china are by now you might say at some point they're going to start and i'm worried about that too but at the moment they're not slowing down their purchases foreign central banks ok joe where you where do you do it and where do you jump you know this you know definitely on the view the crisis is totally overhyped i mean this idea is like wolf we didn't have the dollar we would be greece but we do of the dollar and. we have a fundamentally different monetary system greece greece doesn't control its own currency they're suddenly borrowing in someone else's currency they have to build up a surplus and pay it back we have a fundamentally different system than that and it compares to greece or ireland or any other trying to compare is just wrong and i think look this is something that politicians freak out about and. the other guest said all the sudden it's become a political issue but if you actually i look at the market i look at what how the

market is reacting to america's debt and everything is knowing that all the math is known and everyone's freaked out about how we're bankrupt but the market doesn't seem to care and is not concerned so i really tend to think the issue is mainly a lot of ok i won't go back to martin i mean the market of the market didn't isn't particularly concerned by it but it seems to me when everything gets goes sour the markets are the ones that are saved the bankers are the ones that are saving if there is a crisis they're going to come out on top like they did in the last crisis here i mean are politicians. underestimating this problem because it's just so gigantic i mean i have a calculator on my computer and i can't get fourteen trillion dollars on a number two digits but it's a big number it's a really big number and believing that it's going to be cut down when the budgets continue i mean the defense budget continues to expand i mean if we reach the point where it where there's going to be a clash of this system you can't keep borrowing forever everybody knows that. but

office need most of them put it in stone and really seem to understand the situation. maybe they do and therefore i don't read as outrage the raise their voices or as they do they are marginalized in some way oh and i want to go now one more recently you see those raising the issue of skating a bit more. and finally because this has now become this political issue but obviously that was still ongoing before but i would just like to come back to jeffrey skilling is that when the market the market. i'm seeing the danger because that's a very important one but if you're talking about the markets too seems to look at that one the stock market there but one market and the commodity market so actually is three in that way but mainly if you're looking at stocks market because i want to put it into the basket of real assets because stocks represent firms companies was really the most services for which they can increase the prices and i miss inflation and commodities also represent tangible assets or if these markets are

and worried gold and silver they're going up a lot what do you what do you see i mean i think the more war it's a market gets of all of this over and bet prices and the resulting inflation hyperinflation because that's the only way they could possibly get rid of their debt the more though it's a market gets behind you you see commodity prices rise gold and silver rise as a hedge against this possible bankruptcy or very high inflation and as a result of bankruptcy there is an indirect bankruptcy and also the stock market could actually rise on inflation expectations so really what you want to watch there is the bond market and you're right to some extent we haven't really seen a set of day yet but that's why for investors now as we're gross this story is absolutely now the time to get our done any longer. and even if anything went. even shorter because you're still going in the dollar and the dollar may just suffer through the devaluation so no i don't really see that the market isn't getting adjusted to one another but it's going to come now ok you want to jump in

there are you want to do the who grows. up i mean rose. in the world you're selling environs is what is drastically misunderstood everyone saying oh he's selling gallons because he thinks the government is going bankrupt or what not that's actually know what's going on because he anticipates the end of q e two essentially . the fed goes back to normal zero interest rates of negative interest rates that's essentially a rate hike and historically that would be a good reason to sell bonds to various. look at what his partner mohamed illyrian is saying elsewhere is like of the ten year yield got a bit higher we pry actually buy bonds again so this is another thing people look at his move and start to freak out and say oh this means that he thinks the government is going bankrupt this is actually really nice of so it seems to you but i don't think this is rising so how do you possibly seeing a you even say right interest rates are going to be on the rise how do you possibly saying this these numbers are high interest rates are going to be bearable by the

united states government so that's one issue but i want to jump in here let me go to. the gym just going yeah i seems. so i seem to be between the other two panelists in a sense number one we definitely have a long term fiscal situation which we need to address and at some point if we don't there could be a crisis certainly there is the risk that eventuality could be ten years from now there could be a sharp increase in inflation and interest rates and fall in the bond market we want to avoid that we can do it it's not it's not impossible if we have a balanced kind of program to address it and for my money president obama recently is recent speech addressing an interest broadly speaking with a kind of balance we need to do a little bit of slowing the rate of growth of entitlements we need to cut domestic spending we need to cut military spending we need to do something on the tax side we need to do a little bit and maybe we'll succeed in doing that we certainly can if i sat down

with economists you know a group of economists for both parties we could we could solve it pretty quickly but to be doing it for a very i don't mean it's easy to go to a short break here and after that short break we'll continue our discussion on state party. well. bringing you the latest in science and technology from around the clock. we've done a few jerk coverage. if

you. still. want to.

welcome back your cross-talk i'm carol about three minute we're discussing if the u.s. will default. ok jeff i want to go back to you because you said something really interesting if you could could get members of both parties together you can solve this here is not really a revenue problem and not a spending problem how to generate revenue. it's but i said if we get economist together. i'm going to. go. you know i mean the good the good even though it's there's at the moment somewhat surprisingly i would say the markets are completely relaxed there's no sign that they're nervous about holding us that and as long as they go on doing that we don't have a crisis but we be foolish to rely on that forever that's so that. that's one point it's kind of nonsensical that at this moment in history two thousand and

eleven is when american politicians are suddenly viewing this as a crisis it would have been much much easier much much better to have just half of the support for fiscal stabilization ten years ago or five years ago but we are where we are the good news is maybe we can take advantage of this all this political ferment to address the problem the bad news is that one of the two political parties is speaking nonsense and from arithmetic viewpoint the republicans think that they can solve the private deficit by tax cuts and i mean it's just a complete nonsense and we've shown this over and over again reagan thought the same thing and the budget deficit got much worse he could triple the national debt george w. bush saw the same thing and the budget got much worse he doubled created more debt than all two hundred thirty previous presidents and his father and reagan combined so now the republicans are saying exactly the same thing we're going to we're worried about the budget deficit so we're going to cut taxes it makes no sense ok

what about that because you know there's a particular the united states there's a lot of. wealth in the sense of financial speculation and things like that there's a new concentration of wealth here i mean i know it's politically incorrect to talk about taxing people in a bad time but there are some people that have a lot more than others ok and so if the country is so concerned about that then you know generate a little bit more revenue over a ten year period or something like that i mean the rich are going to stay rich. yes i totally agree that this idea that we face. catastrophe and we're going to become the next greece and have all this and yet this is so severe and it could threaten our prosperity for generations but we can't raise taxes slightly on anyone is an absurd level of sort of split thinking and you know it seems completely contradictory i think what this basically exposes is that most of the base is actually just a pretense for getting it it's the whole thing is

a pretense for getting something else so it's a pretense the republicans want to use the debate as a opportunity to weak in some of the social safety net taxes the democrats will also you know was agree with the republicans that the debt is an issue and they want to use it as an opportunity to raise taxes and cut defense spending so this big problem that everyone agrees that it's a huge problem and it is really just an opportunity to push whatever vision there he had on everything oh you know joe it sounds like to me that everybody wants to go to heaven but nobody wants to die martin if i can go to you i mean if the if this really is a political football and i would agree with our that you guessed it is a political football here because somebody wants something for something ok but isn't this really like the the people on the titanic arguing over the seating order on the top deck because it's still getting worse and worse. absolutely there

even this debate here i mean with historian jeffrey i think they're totally getting carried away in these idle ideological eve bates and arguing this words by the totally annoying what actually the numbers tell us and because we're also talking about the rating because there be a rating downgrade on going ited states on the rate of bank potential bankruptcy and also just want to say not all the rating agencies are stuck in this type of thinking and giving the u.s. a aaa but actually the chinese rating agency. has downgraded in november last year the united states plus it is a negative outlook and i just want to give your call because he also does gave me one from the chairman of the guy who global rating agency and he is saying the rest and rating agencies are politicized and highly highly ideological they do not hear it here to objective standards the u.s. is in southern in faces of bankruptcy as a pure destination by the rating agencies give it a high rating and ranking saw again you know this debate about being about a few

a billion dollars being there is totally irrelevant i think if anything i mean one one hole that i do see for the united states even in the in the near future now it may be our very kiters agricultural sector in trade with china the projections are now that the trade with china is going to grow it's going to double over the next five years and you look at what this has done to brazil saw there are some lightnings but certainly not the budget deficit again i don't see a way out of this short of a restructuring everything as it's just you know. when people wouldn't understand basic economics just if i can go to you. structuring is. granted there are so many ways we could restructuring the restructuring is nonsense we want to outright a situation where ten or twenty or thirty years from now with we have a huge euro or the revenue is growing and we're borrowing from abroad that prime and medicare and we want to avoid a situation where we might be forced into

a. twenty years from now the idea that there is any chance of a restructuring you know within the next few years i'm sorry is just nonsense i don't understand why and i thought i was just saying that yes yes that's a serious problem yes we should address it and there's all kinds of ways we could address that they're politically very costly very dangerous and politicians don't want to say that but you know it's if we had. you added tax or greenhouse gas emission permits together with steps that many of us are proposed to slow the rate of growth of spending in title minutes to trim defense spending in addition to domestic spending do a little bit all around they can be done if problem is a political one it's not an economic problem joe if i can go to you do you think there's some might say this go ahead and i was going to say this is just a mindset in the united states is that the dollars just too big to fail which is too important in the world and we'll just put it off in a few more years like a lot of noise about lifting the ceiling and it let it somebody else worry about it

because he's just pointed out you know ten years from now twenty years from now thirty years from now nobody in office today is going to be in office then. actually i kind of thing the opposite there's a i mean there is that definitely this idea that you know we are too big to fail but what i think is actually more interesting is this kind of opposite strain of thought that's happening this kind of liquidation is like let's not raise the debt ceiling now let's just bite the bullet in the fall let's restructure our debt let's just pull the rug out from under the u.s. banking system and under the dollar right now that's a kind of a surprising new strain that you hear more and more of what if there is no reason to restructure actually you know people say oh the debt situation is getting worse and worse even by some metrics it's not interest payments as a percentage of tax revenue or interest payments as a percentage of g.d.p. have actually gone down because interest rates have gone down over the last twenty or so years so it is clear we have this big and we have a lot of people want to take something incredibly painful want to do something

drastic like not raise the debt ceiling when there actually isn't any kind of external force that she just we need to do something like that jeff you want to jump in there. well yeah i want to i want to make clear that the only reason why words like you know default or even are even mentioned by anybody is not because we're an increase actuation but rather because the two parties of congress are playing a game of chicken a deliberate game of chicken which i mean it's almost like holding holding the capitol building hostage it's not the regular related to the issues involved were not running out of money i mean other countries raise their debt all the time and as long as the debt is an increasing too rapidly for example if it's coming down as a share of g.d.p. or you know it's not that high say that that's not that's not an issue we happen to have this all kinds of corks in our political system and one of them is that if one of the two parties chooses to pull the pin on a hand grenade and say if you don't give me my way on what i want that these other

issues like you know prohibiting abortion and stopping abortions the district of columbia's irrelevant things i'm going to blow us all up i don't hear anyone anyone a single person in the united states saying we ought to restructure i got rather it's it's i'm going to blow us all out if you don't give me my way you know marni it seems to me that to me if the u.s. isn't financially bankrupt it's intellectually bankrupt according to and i'm not i'm kind of extrapolating from what jeff had to say but again you know i mean the thing is is that people are using this is a political opportunity here maybe a crisis that may not be a crisis but i'm going to get what i want to portion was mentioned i read that earlier before i'm going to do this program here but there's a lot of other things that people just want to you know a lot of horse trading and again is is we're going to titanic is going to its final destination people now waking up to what really needs to be done just mention some very good things. yeah i mean definitely i seem to be abating and maybe i even have to get bait on raising the debt ceiling or not raising the debt ceiling

but why this is being debated saying we are thaw it he who can really decide on whether or not they're going to raise the debt ceiling of the u.s. is the bond market and of causing a major blunder investors saw i think that's really interesting to watch we have been watching the eurozone one market re years in the beginning also rising very slowly and then suddenly spiking and if it hadn't been for the bailouts of now it's really yours on countries they would already be history and this can go very very fast or hold london less doesn't particularly this is something to watch a very very careful you know u.s. years going up and we're just last week actually out of the u.k. you know an advisor to the central bank saying that's it within one year a look a interest rates might quadruple so if this is something that's going to happen around the world as a result of the rising inflation which you see are affected in commodity prices go in or silver has been surging like there's knowledge on our own this is the fear of the rising before us. rising potential bankruptcies and also as inflation and if

that continues again as inflation rises interest rates would have to rise because one investors demanded and this is something to watch very carefully as or not you believe the u.s. will go bankrupt or not but watch the rates they will probably tell you earlier so what's going to happen all right jeffrey i'm going to give you the last word we're going to be really having this conversation a year from now. yeah yeah well i mean the feet we should be afraid that met at some point investors get tired of their current eagerness to hold us bonds and there will be a decline in us bond market an increase in interest rates that is not a default or restructure and i do not understand why that word those words have been used at all on this show all right gentlemen we've run out of time here many thanks to my guest today in hong kong cambridge and in new york and thanks to our viewers for watching us here on r.g.p. the next time and remember across.

the. a time arriving here broadcasting live from washington d.c. coming up today in the big picture. you can.