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Mark Weisbrot is co-director and co-founder of the Center for Economic and Policy Research in Washington, D.C. An economist, Weisbrot is a frequent guest on U.S. television and radio news programs and writes a regular column for the McClatchy-Tribune chain of over 550 newspapers.
Cartoon by Jim Morin / Miami Herald (June 27, 2011)
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Washington. And in Washington the great debt-ceiling debate continues. Interesting development on Monday: Moody's, the rating agency, says that their threat or warning that they might lower the credit rating of US Treasury bills might not go down if the debt ceiling is raised altogether--in other words, be no debt ceiling at all, which is a little curious. It means Moody's actually not very worried about the actual size of the debt. They're more worried about the politics in Washington. Now joining us to unravel more of this is Mark Weisbrot. He is the cofounder, codirector of CEPR. Thanks for joining us.MARK WEISBROT, CENTER FOR ECONOMIC AND POLICY RESEARCH: Thank you.JAY: So what do you make of this Moody's thing? I mean, they're essentially saying, we're not really worried about the size of the American debt.WEISBROT: Well, I don't know how seriously anybody should take Moody's. I mean, think of what they did in the run-up to the financial crisis.JAY: Or S&P, yeah.WEISBROT: Yeah. They were rating, giving AAA ratings to bonds that turned out to be worthless on a massive scale.JAY: Well, at any rate, the media still takes them seriously. WEISBROT: I suppose so, but I'm not sure the bond market's taking it all that seriously. And the whole idea that the United States is ever going to default on its debt is pretty remote.JAY: But as a political player, or an actor in this political play, S&P, the rating agencies, have been involved in putting pressure that we're about to face the apocalypse, and they want this thing--at least the pressure's been there has to be massive cuts in social programs or else. But this statement from Moody's today I thought was interesting, 'cause they're really saying, well, no, it's not about the debt, it's about the debt ceiling.WEISBROT: Well, that makes sense, actually. This is a completely manufactured crisis. We don't have a debt crisis in the United States. In fact, if you look at the numbers, the short-term deficit problem that we have is a result of the recession. You lose revenues in a recession and you also increase your expenditure, a lot of it automatically, unemployment insurance and things like that. And so--and we've had a weak recovery. So that's the short-term deficit problem. The long-term deficit problem is entirely--almost entirely a health-care cost problem, which is a problem of our private health-care sector spilling over into government spending.JAY: Yeah. But, I mean, isn't that the real point is that the debt doesn't really need to go up? What needs to be done is--in fact, without the debt going up, there's measures that could be taken that would solve all of this, like health care reform and other sorts of things, like taxation.WEISBROT: Yes. And the problem is that the Republicans just use the technicality of a debt ceiling to kind of create this little mini-crisis over the debt.JAY: So in terms of President Obama's role in all of this, he's not saying that there's no real debt problem. He's essentially articulating the same argument the Republicans are. He just wants to balance it with some tax increases someday. He's pretty vague about what the tax increases will be and when they will be. But what do you make of--does he actually have other political choices other than talking this way?WEISBROT: Oh, sure. I mean, I think he could have made a choice from the beginning to just say, look, we'll talk about the long-term deficit problem after you raise the debt ceiling. I mean, we're not going to give in to the extortion here. This is what this is. It's just, you know, you're trying to force me to make concessions. You don't have the Senate. You don't have the presidency. You couldn't pass cuts to Medicare and Social Security. You're trying to use the threat of a default or some kind of financial catastrophe in order to force things that you couldn't win at the ballot box. That would have been, I think, the proper response from the beginning.JAY: So it wasn't. But he might argue now, we tried to have health care reform with a public option that would have brought costs down more. We weren't able to pass it. So even if real health care reform is a possibility, well, we more or less lost on that, although, you know, they're trying to say they won. But in reality they lost. I think they lost that battle. So we're in a real situation now, which is we can't do much about about the health-care costs, and we're about to have the debt ceiling hit us, and if we don't borrow more money, we're going to be in trouble. Is that not a legitimate argument?WEISBROT: No. I think that--first of all, I think it's all bluff. I think they have--Republicans are pointing a gun at the head of Wall Street and there's no bullets in it.JAY: Well, it's sort of like that scene in Blazing Saddles where the sheriff is surrounded, the black sheriff is surrounded by these white crowd that's about to lynch him, and he takes a gun to his own head and says stop or I'll shoot myself. And, of course, it's about as believable as that, I suppose.WEISBROT: I think so. I mean, the first victims of this are going to be Wall Street if it gets down to the wire. The stock market will fall just like it did in September 2008 when Congress, under pressure--there was real pressure from the public on, like, no, didn't want to give the banks a $700 billion blank check. They voted it down. And then Wall Street said, whoa, what did you do? And the stock market fell. It took a huge drop. And then they just changed their vote. I think that's the worst-case scenario you're going to get is a temporary dip in the stock market, because the banks will be hit very hard if it gets down to the wire. I'm not sure they'll even let it go that far, but if they do, that's as far as they go. They're not going to default.JAY: So if you're someone who supports the sort of progressive objectives and are--is against these cuts to social programs, you would then say to President Obama what, in terms of this standoff?WEISBROT: Well, he shouldn't give in to anything. They can have these discussions. This is a long-term problem, a long-term deficit problem, which I've said, it--as I said, is--and you can go to our website at CEPR.net, and you can take any country in the world that has a life expectancy that's higher than ours and put their health care costs into our budget, and the long-term budget deficit turns into a surplus. So it's all because of our health care costs. And if they want to talk about that, they can talk about that, but first they have to raise the debt ceiling. That should be the bottom line.JAY: Okay. So let's say the Republicans, either one reason or another, perhaps because of their internal politics of the Republican Party, they actually don't cave. Does Obama cave? Or does he live with the consequences of not raising the debt ceiling?WEISBROT: Well, I think if that were to happen, he would probably cave, in reality, because he's also getting contributions from Wall Street. I mean, Wall Street would put enormous pressure on both parties to reach an agreement, and that's what they're going to do.JAY: Thanks for joining us, Mark.WEISBROT: Thank you.JAY: And thank you for joining us on The Real News Network.
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