jay powell is a visiting scholar for the bipartisan policy center. he served as the undersecretary for finance at the treasury under president bush, sr. what are the consequences if the debt ceiling isn't raised in time? the prevailing wisdom is that those that hold u.s. debt, bond investors, would get paid first. but what about everybody else? jay, you and others at the bipartisan policy center say it would be impossible to keep paying for all of the most popular and important programs in this country that americans rely on. that means possible reductions or delays to social security, to medicare or medicaid, food stamps, checks to federal workers. president obama, in fact, said this week that he could not guarantee social security checks would be mailed out if we don't raise the debt ceiling. jay, republicans are calling that a scare tactic. forget the politics. tell me what the numbers say. >> yeah, it's not a scare tactic. it's a fact that if the debt ceiling is not raised by august 2, then on august 3, the federal government will have approximat

he was a treasury official, jay powell, did an analysis of what the government would have to cut. 44% in other spending. even if you pay social security and medicare benefits you have to choose among military salaries. veterans benefits. unemployment insurance. the fbi. the faa. and the biggest bond company the bond fund which already sold, they have already spoken with their wallet, already sold most of their treasury securities. he says the market situation might resemble what happened after lehman brothers collapse in 2008. this isn't a politician. this is the market talk. >> standard and poors is saying if we don't do something real they will downgrade us whether the debt ceiling gets passed by august 2 or not. where we are h headed, the big crisis that is coming is more important than anything now. if in fact we get past august 2 the president has to lead and make some choices. he has to prioritize. and there is enough money in the month of august to make sure we pay the bond holders. make sure we pay social security recipients and troops in the field. after that the president ha

a fellow who was a treasury official, jay powell in the george h.w.ush administration did analysis of what the government would have to cut. 44% in other spending. even if you pay social security, medicare benefits, you have to choose among military salary, veteran benefit, unemployment insurance, f.b.i., f.a.a. bill gross, head of pemco, the world's biggest bond company, bond fund, already sold, they have spoke within their wallet, they sold most of treasury securities, he says that the market situation might resemble what happened after lehman brothers collapsed in 2008. this isn't a politician. this is the market talking. >> again, the market is saying that they are saying if we don't do something real to put us on sustainable fiscal path, do something real, they will downgrade us whether the debt creeling is passed august 2 or not. that is the most important thing to keep in mind. where we're headed. the big crisis coming is more important than anything right now. if we get past august 2, the president has to lead. he will have to make choices. he

former treasury official jay powell says the government would likely pay interest first, leaving popular domestic programs in jeopardy. >> it could be social security, could be medicare, could be medicaid. we can't pay everything. >> reporter: the stalemate has some asking if president obama can order the treasury to keep borrowing. there's a little known section in the 14th amendment saying the public finance of the united states shall not be questioned. >> the president must act in order to follow the command of the constitution. >> reporter: the idea highlights how desperate it has gotten. >> it's crazy talk. it's not acceptable for the congress and the president not to do their job. >> reporter: americans like courtney hinton can only watch in disbelief. >> this bickering and waiting until the last minute, we're not benefiting from that. >> reporter: as washington returns from the holiday weekend, sources close to the negotiations say a deal has to be reached by july 22nd in order to get it through congress in time. whit johnson, cbs news, the white house. >>> meanwhile three u.s. se

and jay powell says that means the treasury will be writing checks against whatever cash comes in that day. and powell should know. as treasury undersecretary in the first bush administration, it was his job to manage the nation's debt. >> by our estimate, the government will get about $12 billion in inflows on august 3 and will have bills of about $32 billion. the biggest part of which, by far, is a social security payment. so there may not be enough cash to make that payment. >> reporter: in august, powell expects the government will collect $172 billion in taxes and some republican house freshmen have argued that's enough to cover interest on the national debt, social security, medicare, medicaid, payments to defense companies and unemployment benefits. but even assuming the treasury can pick which bills it pays, a questionable assumption, the government would be short $134 billion, leaving no money to pay troops and veterans, student loans, food stamps, the justice department, highway spending, air traffic control and on and on. powell says 10% of the nation's economy would be vapo

right now i want to bring in jay powell. treasury under-secretary under the first president bush." mr. powell great to have you on. just so set the stage, we've been talking a lot about debt ceiling lately. how many times did congress raise the ceiling during your time, the treasury? >> it's been 20 years, two or three times. they weren't as stressful as this but a little bit of private hair pulling. >> i do know a number, congress acted 78 times since 1960 to raise the debt limit. point being this has been done more than a few times before. we hear secretary geithner's warnings, hearing them all morning long since before january. we know we hit the ceiling in may. what is it, mr. powell, that makes this time so difficult, so different? >> what's different is people in the country are upset, appropriately so, unsustainable fiscal position. our budget deficits at record levels. there's not a lot of faith congress will do anything about it. that explains 2010 elections and explains all the energy going into doing something now

joining us live from washington is former treasury undersecretary in the bush administration, jay powelli appreciate that you're here. kind of need to talk to somebody like you because ultimately if we get to that august 2nd deadline and we have not increased the debt limit, somebody in the treasury department, maybe the treasury secretary, maybe one of the undersecretaries, is going to have to start making decisions as to who gets paid. >> that's right. if we don't raise the debt ceiling by august 2nd we're going to wake up on august 3 with not enough cash to pay our bills. we'll be cutting programs that are very popular and very important. >> let's go through some of this. let's talk about where we'll stand on august 3rd if this doesn't happen. we'll need about $32 billion in some payments and when you break it down, we're going to have $12 billion in revenue, $32 billion in expenses, so there are things that could get cut, included in that could be defense, could be $1.8 billion to the department of education, $500 million in federal salaries and benefits, $2.2 billion in medicare and

former treasury official jay powell says the government would likely pay interest first leaving populardomestic programs in jeopardy. >> it could be social security, could be medicare, could be medicaid, we can't pay everything. >> reporter: the stalemate in washington has some asking if president obama could simply big foot congress and ordered the treasury to keep borrowing. the argument is based on a little known section in the 14th amendment stating the public debt of the united states shall not be questioned. >> if the congress refuses to act, the argument would run, the president of necessity must act in order to follow the command of the constitution. >> the idea highly -- highlights how desperate the debate has goten. >> that's crazy talk. it's not acceptable for congress and the president not to do their job and to say somehow the president has the authority to then basically do this by himself. >> as the clock ticks down with no sign of progress, americans like courtney hine ton who -- hinton who works hard and lives on a tight budget can only watch in disbelief. >> this bicke

according to an independent report led by jay powell, a republican former treasury official, in augusthe u.s. has an estimated $306 billion in payment obligations but would only take in $172 billion in revenue, leaving $134 billion shortfall for the month of august. in other words, president obama would have to immediately cut 44% of federal spending. as "the washington post" points out, through august, the government could afford social security, medicare, medicaid, defense contracts, unemployment insurance and payments to bondholders. but then, it would have to eliminate all other federal spending, including pay for veterans for members of the armed services, civil servants, as well as funding for pell grants, special education programs, the federal courts, law enforcement, the fbi. what do they do, close it down? national nuclear programs. housing assistance. it goes on and on. and this is to say nothing of the impact on global financial markets. >> i think it would be a calamitous outcome, create a very severe financial shock that would affect not only the u.s. economy but the glob

jay powell, not an alarmist about this by the way is saying clearly still not being an alarmist, butre isn't a solution if they don't raise the debt ceiling. >> i find it fascinating of the trillion dollar coin. >> kind of underscores how absurd this debate has become. and you know, also there's been talk about the president having to prioritize payments. jay powell said legally, it's not so clear that the president has that power without congressional approval. so that's even questionable. >> we know how easy it is to get congressional approval for anything, even the faa these days. >> the trillion dollar coin is neat. i don't know that we anybody a trillion dollar. go and ask for change. the guy on the other side of the counter, like, you know, a wise acre in new york, says you have anything smaller? >> right. no, we have a trillion dollar coin, buddy. >> two half trillion dollar coins. you can split, you have a better shot. >> wouldn't be using it in new york. in hong kong or shanghai. >> that's true. where they always carry change. >> see you in the next hour as well. >>> world m

. >> jay powell was under the way under president bush.en separating back from fiction even getting asked if they issue ious. >> no secret bag of tricks and no magic bullet that will allow us to avoid defaulting on the non-debt-related payments. >> bottom line, jay powell said there is nothing the executive branch with do in the absence of a deal. wolf? >> thanks very much. if the debt battle is leaving a bad taste in your mouth, this man has just the thing to take it away. ice cream. he was handing it out on the mall here. free to everyone. to everyone except lawmakers. there he is. he hopes the frozen treats will be an incentive to them to reach a debt deal. >> thank you. >> everybody qualifies to get a free ice cream. democrats, republicans, libertarians, tea party people, everybody. the only people that do not qualify are those people working up there on the hill. my thinking is when they look out the window approximate see the fun that everybody is having and they are not part of it and they don't qualify, they will say folks, isn't i

we'll ask former undersecretary treasury jay powell.♪ >>> washed, fair and 83 right now. feeling a little more heated, like 90. thunderstorms, 92 later this afternoon. and there's no heated talks between president obama and house leaders on the republican side because they failed, yet again, to break the stalemate over raising the debt ceiling. there are real concerns this morning about your investments, the markets, the future of the credit worthiness of the country. here in the u.s., stock futures are down. joining me now live from washington is jay powell, treasury undersecretary under president george h.w. bush, an expert on how the treasury pays its bills and how washington works. welcome to the program, jay. >> great to be here. thanks. >> we are running out of time here. may 16th, the treasury secretary, said we would hit our debt ceiling. we did. treasury pulling strings all summer making sure they could pay the bills that were coming due. what happens right now? john boehner, according to our reporting this weekend on a confere

the analysis done by jay powell who was a top treasury official.id an analis and found you can do that. you have the mon yepay the bond holders and they will not go in technical default. but you will have to cut other government programs by 44 percent. that is almost half. the argument he makes even if you pay medicare and medicaid. you have to choose between veterans or unemployment benefits and military pay or closing the f.b.i. and faa. >> not necessarily . those are scare tactics. what about money that we spend on nonessentials? >> there is not 44 percent of that. chris, not if you are going to try to do it straight down. you have to take program by program and find that mon i. - money. >> some ages cut 60 percent and some 30 percent. the same across the board, no, that's not how you get there. you take agency by agency and look for those cuts and some will be bigger than 40 percent. >> since we last talked you put out an economic plan that will put america back to work and based on cutting regulations and lowering taxes. you would lower the to

. >> jay powell, interest rates, presumably they would go up in the doomsday scenario? >> yes, i think kristy said it demand goes down, rates go up and that could play out at a consumer rates, mortgage rates, that sort of thing. by add, in the instance of default, i don't think you are looking at lehman. the chaos in the economy, it'll be in people who weren't getting payments and really significant negative shock to the economy rather than in the markets. >> the other thing, if i could add there, jay, is what we don't know is the unknown unknowns. so you know, there are so many dominos in the world economy that be connected to u.s. treasuries and that are built around a triple a rating for u.s. treasuries with. we can't predict what link there will be in the global chain that would break in the u.s. defaults. >> should someone at home watching itself play itself out, news of reports going on behind closed doors, whether the government preparing, whether rating folks preparing, whether wall street preparing, what about a typical american? is there any level of preparati

. >> that's jay powell, he oversaw the debt under the first president bush. he said if the u.s. hits the debt ceiling with no more borrowing, the u.s. will bring in maybe $172 billion in august. but it's committed to spend, oh, about $306 billion. so there'd be enough money to pay just 56% of government's bills. and then -- >> the decision on who gets paid is left up to secretary of the treasury geithner. he can decide what gets paid and what gets not. >> reporter: nearly everyone expects wall street investors would get paid first and the u.s. would not default. but then, it's tough. government could pay social security, medicare, and unemployment benefits, but there'd be no money to pay the troops. or government could pay the troops, but then couldn't afford unemployment benefits. and in both cases, there'd be no money for security or any other federal workers. now back to wall street. what would happen to the markets. interest rates likely would rise. how much? that is in dispute. >> it seems very likely that there would be significant disruptions in the market. i think that t

. >> jay powell, interest rates, presumably they, too, would go up? another part of the doomsday snare dwlee would affect everybody? >> yeah. i think cristea saidwell. interest rates are likely to go up because some buyers go away. rates have to go up. those play out. if it happens any period of time those play out at a consumers rates, mortgage rates, that sort of thing. i would add in the absence of an actual bond default you're not looking at lehman. the real chaos is in the economy. in people who aren't getting their payments and really significant negative shock to the economy rather than in the markets. >> the other thing, if i could add there, jay, is what we don't know is the unknown unknown. so there are so many dominoes in the world economy that are connected to u.s. treasuries and that are built around a aaa rating for u.s. treasuries and we can't predict the link in the global chain to could break, should the u.s. default. >> should someone who's at home and watching this play itself out, the news is full of reports of what's going on behi

jay powell served as top official at the treasury department under president george herbert walker bushnd has studied the potential consequences for the independent bipartisan policy center. he joins us now. jay, what does happen when time runs out, whether it's august 1st, august 3rd, what do we see happening? the bond holders are going to be paid so what kind of choices does the president have to make? >> that's exactly what we see. we see if the debt ceiling's not raised by august 2, starting on august 3 and for the rest of the month, we assume the bond holders will be paid their interest. we assume there's not much risk on that. but that other creditors who are beneficiaries of federal government payments, approximately half of those won't be able to be paid, 50% of other government payments, there won't be the cash to pay them. and we tried many experiments. you can't cut 50% overnight without eliminating many, many popular, important programs. we tried. you can't do it. >> social security might be a separate issue because there are a lot of technical reasons why the trust funds co

here to discuss that report is jay powell, who served as undersecretary of treasury under president george h.w. bush, and is now a visiting scholar at the bipartisan policy center. >> thank you, good to be here. >> the president said today that on august 3rd, social security checks might not go out. is it that dire? >> well, if we don't raise the debt ceiling by august 2nd, then on august 3rd, the federal government will come to work and will be short $.44 on the dollar for the rest of august and will not be able to make a great number of very important payments. so the president's statement is important on its face. >> there are public opinions because people first of all said hey we should pay our debts and now they're saying maybe we shouldn't default. what is the distinction between what we're seeing here? is government default really an option? >> well, there's sort of a laboring game going on here. let me divide it. the first is an actual debt default and my work in the background says that's an unlikely event. there's always enough money to pay interest on the debt and it's probably

so this is what i want to talk about now with jay powell, he was a former treasury under secretary underh, a visiting scholar with the bipartisan policy center which gave us these number. jay, you've run the number. you and your group has run the numbers many different way. what happens in your mind on august 3rd? >> first of all, we don't think that there will be a default on our debt. we think the interest will always be paid first. that's the way it has to be. we have no choice but to default on our debt. half the other payments can't be made in the month of august, and on certain days it's worse. the after temperature in washington might be 70. today's 100. if the average day is 50/50, you showed august 3rd. a whole loss worst than 50/50. a calamity on the first day of a the deadline expires. >> short of trying to illustrate, somebody in the treasury department or somebody somewhere will have to start making choices like this, because if everything can't get paid they've got to decide what does get paid. the other day the fed chairman, ben bernanke, whether or not, everybody says you

i spoke to jay powell who says there are limited appearses. >> it's funny. people want to believe the treasury department has a secret bag of tricks they can deploy to make sure the government is fully financed, and it just is not true. >> wolf, as august 2nd is the deadline, come august 3rd -- this is a wednesday, we have 12 billion into the coffers, but $32 billion in scheduled payment. the next day is not much better. under any scenario, that is an incredible amount of money, we have $10 billion that we owe. you can look at friday, same thing, $7 billion incoming, but $12 billion out the door. i spoke to someone at the treasury department. they say the point is even if the government is able to pay the interest on the debt that it owes, that they consider it still a default if the united states golf is not able to pay federal workers. the other point they make is that it's not easy to essentially just shut down payments. the u.s. government makes 80 million payments every single month, and a number of those are electron electronic, so it's not as easy as

if there is no deal struck, august will prove, as jay powell told us, impossibly difficult for the nation'scutive. jenna? jenna: maybe that's the phrase we'll use right now. james, thank you so much. the truth about the default and more as we get it. james rosen in d.c. more on that breaking news out of europe as well. bomb blast in oslo, we hear about an attack at a summer camp, a separate attack outside of the capital city. information coming in to our newsroom and also at foxnews.com. check it out during the break check it out during the break for all of the top stories. we'll be right back with more. . new citracal slow release... continuously releases calcium plus d for the efficient absorption my body needs. citracal. time to mix it up with new philly cooking creme. it'll make your chicken creamier, dreamier, with lot flavor. spread the love in four fabulous flavors. spoon in a little new philly cooking creme. jenna: a fox news alert as we bring you up-to-date about what happened now in oslo. oslo, the capital city of norway, trying to recover right now, again, reports of a rescue att

punt these to congress but president obama and geithner will no deal struck august will prove as jay powellus possibly difficult for the nation's chief executive. back to you. >> shannon: new details at this hour terror attack in norway. the man suspected in friday's bombing and mass shooting attack confessed and claims he acted along. andres breivik will appear in tomorrow. the death toll is 93. i'm shannon bream. hour two live in the nation's capitol starts right now. captions by closed captioning services >> shannon: sundays are often pretty sleepy here in washington not this afternoon. congressional leaders are racing to strike a deal hours from now. john boehner stepped up the pressure outline of an agreement in place before that at 4:00 p.m. eastern. mike emanuel is live at the white house latest on the dent talks or the lack therefore we should say today. the question many americans are asking right now will washington get this done, mike? >> that is a great question, shannon. i can tell you our colleague chris turner, who cover the senate says that a senior senate democratic leaders

. >> jay powell laid out a detailed description of exactly what would happen on august 2. many members of your caucus and said that they do not think the debt ceiling would need to be raised that point. >> i do not know, but i thought they had a very good conference this morning. there was solid information provided to the members. the analysis provided by the bipartisan policy center closely followed a lot of information that has been developed by the joint committee -- joint economic committee. i think the information was very helpful for members. >> if you have this vote next week and it will not move forward in the senate, would you be more open to something like what senator mcconnell proposed? >> i am not going to answer. if ads and buts or candy and nuts, every day would be christmas. >> shortly after the republican news conference, house democrats met with members of the media to voice their support for president obama concerning the debt negotiations. this is just under 20 minutes. this is just under 20 minutes.

what we could pay and what we couldn't pay.ow jay powell, the former undersecretary of treasury, under president george h. w. briefing. it outlined his research on what is likelyesat to happen on augu. he suggested that in the month of august wehe could pay our det interest, social security checks, medicare and medicaid, vendors for defense projects, and unemployment insurance benefits. that is what we could pay. but, no pay for active duty military. no benefits for veterans. no federal loans for low income studentslo about to head off to college in the fall. no pell grants.nt no federal government employees, includinglu counterterrorism agents in the fbi for example. no border agents. w now, before wee default, we coud have time to make this sign for all points of entry. that is just the tip of the iceberg. that is just a sample of things we definitely could not afford to do. you can take that down. that doesn't even address the global economicobal impacts of playing so close to the edge and thethe dollar would he devalued. our creditd. rating with a downgraded. it would cost us much

. >> you met with jay powell who laid out a very detailed description of what exactly would happen onugust 3 with the debt ceiling. many members of your caucus have said that they don't think the debt ceiling will need to be raised at that point. has this presentation changed your mind? >> that i don't know, but i thought that we had a very good conference this morning. there was a lot of very solid information provided to the members, and the analysis provided by the bipartisan policy center frankly closely followed a lot of information that's been developed by the joint committee -- joint economic committee. i think the information was very helpful to members. >> speaker boehner, do you get the sense that your members might be more open to something like mcconnell if it includes spending cuts in it? >> i'm not going to answer a whole lot of speculative questions. and i don't need to repeat my often-said monotra, but maybe i should. if and and butts were candy and nuts, every day would be christmas. [captions copyright national cable satellite corp. 2011] [captioning performed by nat