Jack Lew: Unknown Consequences If We Hit Debt Ceiling [PREVIEW]

United States Treasury Secretary Jack Lew spoke with FOX Business Network’s (FBN) Liz Claman about the government shutdown and its impact on the economy. Lew discussed the potential of the nation hitting the debt ceiling, and said, “No one knows with certainty how bad the consequences are if we cross the line.” He went on to say, “We need Republicans to come to the table in that spirit of trying to find meaningful compromise.  But it can’t be that the engagement is the kind of completely unrealistic notion that you can repeal the Affordable Care Act to fund the government for two months, or even to fund the debt.” Lew also said he thinks there is “real damage” from “the cuts that are coming from sequestration.” When asked whether the U.S. credit rating could be downgraded if we hit the debt ceiling, Lew said, “I wouldn’t speculate on what the rating agencies would do.”

Jack Lew on how bad it would be if we hit the debt ceiling:

“Last time we saw market reaction to the threat of default — we never actually crossed the line.  No one knows with certainty how bad the consequences are if we cross the line.”

Jack Lew on how he plans to prioritize what to pay come October 17^th when there will be approximately $30 billion in cash on hand:

“You know, if want to think of it in terms of an American household, when a family can’t pay all its bills, if it doesn’t pay its mortgage, it’s in big trouble.  If it doesn’t pay its electric bill, it’s in real trouble.  If it doesn’t pay its credit card bill, it’s in real trouble. There’s no good solution if you can’t pay all your bills.  And the United States government is not just another party.  It is the gold standard in terms of what full faith and credit means.”

Jack Lew on whether he and the President are willing to negotiate on either defunding parts of the Affordable health care law or on cuts in major spending and entitlement programs to prevent hitting the debt ceiling:

“Well, the President has been very clear.  You cannot negotiate over whether or not we pay our bills. Congress is going to have to open the government and Congress is going to have to allow us to pay our bills.  The President is and has always been open to serious compromise on fiscal policy issues.  We’ve been engaged for years in negotiations, where we’ve tried with some great deal of effort to reach an agreement…. We need Republicans to come to the table in that spirit of trying to find meaningful compromise.  But it can’t be that the engagement is the kind of completely unrealistic notion that you can repeal the Affordable Care Act to fund the government for two months, or even to fund the debt.  They have nothing to do with each other.  Our constitutional democracy can’t work that way.  It hasn’t worked that way before and it can’t work that way in the future.”

Jack Lew on whether the U.S. credit rating could be downgraded if we hit the debt ceiling:

“Look, I wouldn’t speculate on what the rating agencies would do.  I would look historically at 2011 and point out that when we did not actually cross the line, we did see a downgrade.  And you know, I don’t think that we want to open the door to find out what happens if the United States actually fails to pay its bills on time.”

Jack Lew on whether people don’t believe the worries being articulated here because they think it’s similar to the scare tactics used during the sequester battle:

“You know, I think there actually is real damage being done at the — from the cuts that are coming from sequestration. But I think if you look at what’s happened, even in this last week, a week ago, the people who decided to shut down the government, I mean, it was a decision to shut down the government if we don’t get our way on the Affordable Care Act.  We’re acting like nothing of any real importance would be sacrificed if there was a government shutdown. Now they’re trying, item by item, to reopen things that they think are causing problems.  Now my heart goes out to people who have either lack of access to health care or any meaningful disruption in their business or family life.   But the answer isn’t to go through and open one thing at a time.  It’s to open the federal government and to accept the fact that there’s a responsibility that goes with positions of authority, and you can’t shut down the government; you can’t stop us from paying our bills.”

Jack Lew on whether it is now more than a theoretical possibility that we will hit the debt ceiling:

“I obviously believe that Congress can act and should act to make it a theoretical possibility. What I can tell you is that in the absence of action, we’re looking at a very real deadline that we will not have the ability to borrow money after October 17th.  And we will run down our cash very quickly.”

Jack Lew on whether he suggested in his October 1^st letter to Congress that there aren’t any more contingency plans:

“You know, I wrote that letter for precisely that reason.  There is the dangerous notion that there’s always something else in the drawer.  Congress needs to understand that on Tuesday, I took the last steps I can take to create borrowing capacity.   I don’t have any more, what used to be called extraordinary measures.  They’re used so frequently that extraordinary seems a little bit of an overstatement now.  They’re accepted tools of managing to the limit. We don’t have any more.  We just don’t have any more.  And Congress has to act.”

Jack Lew on whether the President will invoke the 14th Amendment:

“The White House has spoken clearly to this issue, saying that there is no ability that the President has to do that. I will leave the statements that the White House has made to stand.  I know that others keep raising the question.  But the White House has spoken very clearly.  This is obviously a presidential decision.”

Jack Lew on whether hitting the debt ceiling could be as bad as the 2008 financial crisis:

“You know, we’ve never in this country defaulted.  We’re a country that meets our obligations. Since 1789, the full faith and credit of the United States has been the gold standard.  And there’s a reason why the U.S. currency, the dollar, is the world’s reserve currency. So the notion of introducing risk, that the one risk-free investment, the one risk-free party to do business with may not pay all of its bills, that’s a very dangerous thing to do.”

Jack Lew on where the President is willing to negotiate:

“You know, when the President put out his budget, it was kind of an interesting moment.  If there was a desire on the other side to engage, they could have said he’s offering us some of the major things that we’ve asked for to try and reduce entitlement spending.  You know, his budget includes a provision that would change the way we calculate the consumer price index, you know, it has a provision that would put a premium in place that would means-test Medicare eligibility. These were big things.  These were things that could have been the basis of Republicans saying we can come and talk about some revenue, you can talk about some entitlement reform.  Now I’m an optimist.  I think we’re ultimately going to be at some point around a table where people negotiate in goodwill to reach an honorable compromise.  But it can’t be with the threat of blowing up the economy.”

Jack Lew on what his number-one focus would be if we do have a resolution:

“I would dearly like to come to work tomorrow morning and get back to what the American people should want us to be working on.  We should be working on the investments in the future that will create economic opportunity for the next generation. We should be working on international economic policy to make sure that it’s not just a strong U.S. economy, but a world economy that promotes U.S. economic growth. We should finish the work on fiscal policy in a sensible, balanced way and we should finish the work on financial reform so we can tell the American people, you know, squarely, that we’re not going to have another crisis like 2008.”

Jack Lew on whether he has been talking to CEOs to see what they are saying:

“I’ve been talking to lots of CEOs and I think they would very much like to see us get back to the business that I just described.  You talk to CEOs, they want to talk about tax reform.  They want to talk about infrastructure.  They want to talk about trade policy.  They don’t want to talk about Washington creating economic problems, which is what the congressional approach right now is doing. So we need to open the government; we need to be able to pay our bills.  And then we should get back to the business of growing the economy.”

Jack Lew on what happens if we hit the debt ceiling:

“You have to kind of realize what we’re actually seeing.  We’re seeing demands of extraordinary nature, not to solve all the problems of the country, but just to open the government for a few weeks.  These are not — this is not the way to run the greatest country in the world.  We cannot be in a constant threat of shutting down the government or not paying our bills. We need to engage in meaningful negotiation and meaningful compromise.  But we have to be done with this brinkmanship.”