Jack Lew: “The U.S. Should Never Not Keep Its Word To Pay Its Bills”

Jack Lew: “The U.S. Should Never Not Keep Its Word To Pay Its Bills”

United States Secretary of the Treasury Jack Lew spoke with FOX Business Network (FBN) about moving up the deadline for the debt limit saying, “Congress should act; they need to act as quickly as possible.” Lew went on to talk about the debt limit saying, “I’m trying to be very clear: the consequences are very serious.  And I don’t like to be an alarmist; I don’t want to do anything to cause there to be anxiety about the state of the U.S. economy.  But we have to worry about a self-inflicted wound, which is why Congress needs to act.” Lew went on to say, “The United States should never not keep its word to pay its bills.”

Jack Lew on sending a letter to Congress that the debt limit is November 3rd:

“You have to keep in mind that the U.S. government is a $3.7 trillion, almost $4 trillion enterprise.  We’re talking about swings of $4 to $6 billion, very small changes.  Because when we hit the limit and can’t borrow anymore, we’re operating on a cash basis.  It means we have to have enough money every day to pay the current day’s bills but also the next day’s bills. At the point on November 3rd when we run out of borrowing capacity, we will have roughly $30 billion in reserve.  That’s very little.  There are individual days when we have $50 billion of expenditures…A single day.  So the swings are dramatic from day to day in terms of what bills we have to pay and how much money comes in.  You can’t get to zero.  If you get to zero, you’re going to fail, at some point, to pay your bills…So you need to be sure you raise the debt limit to avoid that.”

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Jack Lew on how long it would take to run out of money:

“So, as I’ve said, we have $30 billion and we’re opearting on cash.  There’s a bit of time before you actually run out of the ability to pay your bills, but not very much time.  A very, very short period of time.  Congress can’t get to the place where we don’t know how many days we can go.  It’s an inherently unrepdictable thing, because the day-to-day cash flow is not locked in in advance.”

Jack Lew on how tax revenues are trading:

“We saw and the reason the date moved from the 5th to the 3rd is, we saw, as the September tax collections came in, as the final September expenditures were made, that the numbers were just a little bit lower on the revenue side, a little bit higher on the expenditure side, a $4 to $6 billion difference.  That’s what moved the date from the 5th to the 3rd.”

Jack Lew on the consequences of hitting the debt ceiling:

“I’m trying to be very clear: the consequences are very serious.  And I don’t like to be an alarmist; I don’t want to do anything to cause there to be anxiety about the state of the U.S. economy.  But we have to worry about a self-inflicted wound, which is why Congress needs to act. What we don’t need right now is to take an economy that’s now doing well, looked around the world as a source of strength, and do something that weakens it.  That’s what would happen if Congress fails to act.  Congress needs to act.”

Jack Lew on whether he heard from anybody in Congress since his letter went on this morning:

“Well, I put in calls as I always do to all the leaders when I send these letters.  I will speak with all of them.  I’ve spoken to some of them.  I think they understand, you know, we — my policy for the last three years has been to share information as we know it.  I think that it’s a good policy.  They need to know and they need to be able to avoid an accident and a misstep. Only Congress can raise the debt limit and something I have to remind you and your viewers about is the debt limit does not commit us to any new spending.  All the debt limit does is it gives us the ability to pay the bills for expenses that were committed to a long time ago…And it would be the equivalent of running up a, you know, as a former Republican governor said to me, running up a tab at the restaurant and leaving without paying the bill if you do otherwise. The government of the United States in our entire history has never failed to pay our bills.  We can’t begin now.  Congress should act; they need to act as quickly as possible.”

Jack Lew on whether he believes Congress will act:

“So I believe that the leaders of Congress understand this has to happen.  I don’t think it was a very good experience the last time.  We got right up to the edge, and, you know, we’re talking about a global economy that is it’s an anxious time in the global economy.  The U.S. is seen as an island of strength in the global economy right now.  This would be a terrible time to raise concerns about whether the U.S. has the ability to pay its bills and maintain its stability…I think the leaders understand that.”

Jack Lew on what will happen if we hit the debt ceiling:

“The consequences of not being able to pay your bills means that the day will come when there isn’t enough money in the federal account to keep current with our obligations.  Depending on what day it is, that will affect different kinds of obligations. To me, it makes very little difference in terms of the consequence of keeping our word if we pay one but not the other.  We have to pay all our bills.  It’s just unacceptable.  We can’t say we’re going to pay Social Security but not veterans.  We’re going to Medicare but not to people who provide electricity to federal hospitals?  And we have to pay our principal and interest on our debt. There been I think a fallacious notion that you can pick and choose.  Our system was set up to pay our bills.  Because the full faith and credit of the United States should never be called into question.”

Jack Lew on why we can’t prioritize our debt:

“I think the idea that the United States government would say there’s some set obligations where we promised to pay, whether it’s a benefit to an individual, or paying for services that we’ve already received, and we’re not going to pay those because we don’t have  the money?  That would be a terrible thing. What does that say about the credit-worthiness of the United States?  The reliability of the United States?”

Jack Lew on whether he won’t prioritize:

“I’m saying that in the entirety, with 80 — we have tens of millions of transactions, you know, every, every period…Bill paying, bill paying.  And we don’t have the capacity to pick and choose we’ll pay this bill and not that bill.  The systems weren’t set up for that purpose. I think it’s a mistake to go down this road of asking what can you pay and what can’t you pay?  Because fundamentally at the moment when choose not to pay one set of bills, what you’re saying is the United States government can’t be trusted to pay those bills on time.  That’s a terrible thing.  No Congress should do that.  Only Congress can raise the debt limit.  If they want to debate what commitments we should make, it should be before we make the commitments, before we consume the services, before there’s a reliance on the United States keeping its word… The United States should never not keep its word to pay its bills.”

Jack Lew on how soon we could see a government shutdown:

“Well, government shutdown technically is normally tied to appropriations.  And that’s a separate issue.  You know, the failure to pay our bills is obviously highly consequential.  I’m not going to speculate on what bills we would and wouldn’t pay and what the consequence would be, because it’s just unthinkable that we’d get to a place where we’re picking and choosing what to pay or not paying our bills.”

?Jack Lew on some members of Congress saying he is bluffing and fudging the numbers:

“You know, the numbers are the numbers.  I get reports daily.  We publish daily Treasury statements.  Experts who are looking the numbers are drawing the same conclusion that we draw. You know, there’s different analytic approaches as to what the deadline is.  We believe the deadline has to leave you with a buffer that you can always pay the bills, that you’re not going to kind of come a little bit short on today or tomorrow’s bills.  There’s some who estimate when do you get to zero?  If you get to zero, you will fail to pay your bills someday.  You can’t get to zero.”

Jack Lew on what kind of dislocations would we see if we get to zero:

“Well, the bill — the first whatever bills we’re not paying, there would be delayed payment of some kind.  You know, if we don’t have the money, we can’t pay the bills.  So that would be bad.  It would be bad.  I can’t tell you what it would be until you tell me what day it is and what we would be failing to pay.  Now what I can tell you is that confidence that the United States always pays its bills is at the heart of the full faith and credit of the United States.  Putting that into question is a dangerous and irresponsible thing, which is why I think Congress has to act.”

Jack Lew on the next Speaker of the House wanting to extract spending cuts before they lift that debt ceiling:

“Look, we have lived through many difficult political periods and no Congress has forced the government to face this default moment.  This Congress, like all other Congresses, can act and has to act. We have made clear that we are not going to allow the ability to pay our bills to be used as a kind of leverage to extract policy concessions that are otherwise unacceptable…We saw that that was a path that led to nowhere good. Now, if Congress chooses to combine the debt limit with other things that are mutually acceptable, we’ve always said that’s a different story.  That’s different from extracting unacceptable policies.  I think they understand exactly the line we have drawn and they understand we’re very serious about it.”

Jack Lew on pairing spending cuts with raising the debt limit:

“Think what you saw in 2011 and 2013 was unprecedented in terms of the willingness, if not the desire, to drive things towards that default point.  We never had a portion of Congress saying default was an OK place to go.  That changed the discussion in 2011 and 2013.  And we had to draw the line.  We had to say this has to stop.  Because at some point, you make a mistake, you have an accident, you slip and you go to a place that is a very bad place to go.”

Jack Lew on whether President Obama would consider invoking the 14th Amendment:

“We have gone through this over and over again over the years.  The only way to make sure that the U.S. government continues to meet all its obligations is for Congress to vote.  Only Congress has the authority to raise the statutory limit.  And they need to do it.”

Jack Lew on whether he would weaken U.S. dollar slightly:

“I mean, let’s be clear, what is going on in the global economy right now is that the U.S. economy, on a relative basis, is doing — is performing more strongly than other economies.  And that naturally leads to a stronger currency.   The answer is not for the U.S. economy to get weaker; it’s for the rest of the globe to do better, for demand around the world to increase.  And this would work itself through.  There’s no doubt that there are some headwinds right now because of that situation, but at the core the U.S. economy is doing very well.  It’s — we’re — as I mentioned earlier, we’ve seen auto sales at a very high level, almost historic level.  We’re seeing confidence at a very high level.  You know, we’re seeing signs of a strong and stable continued growth path. I think we need to stick to making sure we continue to take the steps to strengthen the U.S. economy.  And we need to, as I have been just this last weekend at the IMF annual meetings in Peru, urge our international partners to do more to strengthen their economies. What we can’t tolerate is we can’t tolerate if countries take steps to gain unfair advantage, to devalue their currencies, and we’re very aggressive pushing back on anything that looks like that.”

Jack Lew on Puerto Rico:

“We have made clear at every point in the process that there is no discussion, no consideration, being given to any federal bailout of Puerto Rico. What we have done is for the past, well, over a year, engaged with Puerto Rico to provide technical advice, support.  They needed a lot — to do a lot of work to even be able to understand the state of their budgetary challenges, and we continue to provide technical support, which we will continue to do. I see no, no…scenario where there’s going to be a federal bailout of Puerto Rico, but I do think there are things that Puerto Rico can do to move forward in a positive direction.  They need to continue to keep their fiscal policy moving in the right direction.  They need to have greater assurance that they will use their revenue to pay their bills, particularly their bondholders.  And they need to have negotiations to restructure their debt. I have supported legislation that would give them the protection of the bankruptcy code to make it easier to negotiate with their bondholders.  It would be a good thing if Congress passed that.  And we’ll continue to help them with technical support, which I think is something we need to do.”

Jack Lew on whether he will stay till the end of President Obama’s administration:

“You know, I have — I have not given any thought to leaving.”

Jack Lew on whether he will stay through all the way:

“The opportunity to make a difference in the affairs of your nation and the cases of work I do, you know, global economic policy and security policy, is an extraordinary policy to make a difference and I, for one, am thinking about what I do every day when I come to work to make a difference.”

Jack Lew on why not negotiate with the Republicans that this Freedom Caucus appears to have some type of power:

“You know, there’s multiple conversations going on with Congress and I’ve spent much of my career negotiating bipartisan budget agreements between — from both ends of the street, from a congressional and a White House perspective.  That kind of conversation that’s going on right now, there should be an agreement where, you know, we can agree on how to get some savings to relieve the pressures of across-the-board cuts that are hurting our national defense and the ability to build our economy.  And that’s the place where there’s room for bipartisan compromise. On something like paying our bills, that’s not something we should negotiate over.   There are common obligations.  Congress has passed laws.  Pursuant to those laws, we’ve made commitments.  Now the only question is do we honor our commitment?  Congress just has to do that.”

Jack Lew on every time the beige book comes out from the Fed it says modest growth:

“You know, look, I think the growth we have, when you look at where we were in 2009, is really very considerable improvement.  We — we were dropping like a rock in 2009; we’re now growing at a steady rate.  We’ve seen unemployment fall from 10 percent to almost 5 percent.  We’ve seen the federal debt drop from, you know, 10 percent of GDP to today we reported 2.5 percent of GDP. We’re seeing an economy that is showing the strength that — that should make us want  to do even better. There are things we could do.  We have made clear that if Congress were to pass legislation to increase our investment in infrastructure, it would accomplish two things at the same time.  It would lay a foundation for strong economic growth in the coming generation when we need the best roads, airports, and waterports in the world, and we won’t have them if we don’t invest.  And it will put people to work today, working on those kinds of projects. Now I can’t think of something that would make more of a difference than that, and that’s something where we ought to still be able to get bipartisan agreement. We proposed combining tax reform with infrastructure because we thought there was a way of doing two important things, you know, cleaning up our corporate tax code and paying for infrastructure.  It’s getting late in the year but I haven’t given up.”

Jack Lew on several years ago having an $800 billion stimulus that people feel didn’t quite stimulate:

“Yes, but if you look at the U.S. recovery compared to recoveries around the world, the fact that we had a monetary policy that pushed hard, a fiscal policy that pushed hard, we fixed our financial system — that’s one of the reasons, those are the reasons we’re doing better than other economies. So I think our policy response has made a big difference.  That doesn’t mean there’s not more we can do.  I think that, you know, the case for infrastructure is not just short-term stimulus.  The case for infrastructure is we deepen the Panama Canal and we don’t have ports that are big enough to take the boats that can go through the deeper Panama Canal.  That doesn’t make any sense… We have people sitting in traffic for hours wasting time, burning fuel, not being productive at work, and being grouchy when they get home.  That’s not good for the economy.”

Jack Lew on the redesign of the $10 bill:

“I work in an office with a life-size portrait of Alexander Hamilton.  I look at him every day when I’m making every decision that I make.  I think that we owe an enormous debt of gratitude to him for having helped build our economic and political system. And I said in June when I announced the redesign that we were going to continue to honor Alexander Hamilton, and at the same time we were going to, for the first time in 100 years, have the image of a woman on our currency, and reflect the themes of democracy in America. We’ve spent the summer listening to the American people and in fact we’re still listening.  I did a session with some students yesterday and got some great ideas. I think if you wait until we are ready to make an announcement, you’ll see that I keep my word when I say we’re going to honor Alexander Hamilton.  We are going to honor Alexander Hamilton, but we’re also going to have women on our currency, and there are going to be depictions of our — of what it means to have democracy in America. I also made clear that the $10 bill is the first bill to come out in a new series, and there are going to be some changes in some other bills as well.  So stay tuned.”

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