Barro vs Santelli Debt Ceiling CNBC Slugfest [VIDEO]

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Ben White, Politico; Josh Barro, Business Insider; and CNBC’s Rick Santelli discuss the market’s complacency on debt battle in Washington. “I’d say a government shutdown is bullish for markets,” says White.

Barro vs Santelli Debt Ceiling CNBC Slugfest [VIDEO]


Santelli video, transcript below

ben white we had a bad week but not the kind of week one would expect if you have such an impasse on the horizon on the debt ceiling. should we be worried? i think we should be more worried but not so much about a government shutdown as about a debt ceiling crisis. i’ve come around to the view that a shutdown might actually be a good thing in the sense it would allow for a lot of the tension in the system to get worked out. republicans in the house would show they’ve stood up to obama and shut down the government over obama care. then you get some sort of deal after that to fund the government, probably also raise the debt ceiling because i imagine republicans will get negative feedback over shutting down the government. if that doesn’t happen, we get a temporary deal to fund the government for a couple of weeks or months, republicans will be spoiling hard for a fight over the debt ceiling. they’ll want something out of obama care. there’s no way obama will give them that. that means a debt ceiling breach is more likely. i would say a government shutdown is bullish at this point for markets. you think it’s bullish for markets? yeah. i think it means there’s less chance of a debt ceiling crisis. i think if you punt this off to the debt ceiling in a couple of weeks or months, then you get more of a crisis. you get a situation where republicans say we’re not voting to raise the debt ceiling unless you give us something on obama care or spending cuts. when the white house says they won’t negotiate, th serious. they’ll say, you’re one half of one congress, but we’ll shut down the top priority because you refuse to raise the debt ceiling and blow up the economy. that wouldn’t happen. josh? i think the odds of a debt ceiling crisis where an actual payment is missed is still close to zero. i think most republicans are very afraid of having a shutdown like that that they’ll get blamed for any negative economic consequences that ensue. so even though a lot of people in the house are spoiling for a fight, i think boehner and his caucus are talking about a fight they but they can’t get there. republicans were talking about how they would use debt ceiling to extract concessionings, saying the boehner rule was in play. they didn’t get it. ultimately in january the president made very clear he wasn’t going to give anything up and he was able to get republicans to cave. i think if republicans made one small ask on this, for example f they saidings we’ll give you debt ceiling increase for excelling the keystone pipeline, they might get that. the president will say, they’ll be left with no option other than to work with nancy pelosi and democrats to do what they did in january and come up with a reasonably clean debt ceiling increase. i think there’s risk of a negative shutdown, but the big risk is unlikely to happen. it’s a good point. rick santelli, do you think the markets are complacent about all of this? no, i don’t think they are at all. i don’t think the markets are complacent. i’d like to ask both our gentlemen because they are probably way more informed on politics than i am. do they think the impuj — the president understands the difference define a budget deficit and the national debt? because when he was commenting, he certainly seems to be flip-flopping between the two. the national debt under $17 trillion really doesn’t go down. the budget deficit optimistically, let’s say $670 billion, which is a much smaller deficit than we’ve had the last several years, but if you take out the obama years, $670 billion deficit on the budget for one year, still the largest there is on record. so, to me, bragging about bringing it down so dramatically, the only reason he brought it down northern anybody else is because it was higher than anybody else. and i think the public polls are reflecting the national debt, even though i think much of the dialogue flip-flops between the two. interest rate markets are telling me there’s nothing to worry about about what’s going on in washington. i think the president does understand the difference. i don’t know if he messed the two up in his speech just nout but i think his larger point is on raising the bt ceiling is that we have done a lot of debt reduction. republicans have won a lot. we’re talking about a spending deal that’s a lot less than democrats would want. we have done no deficit reduction, though. in 2012 — through sequestration — at the end of 2012 we pulled forward boat loads of money to beat tax rate increase that won’t be replicated. that was more of a passive gain than proceed active gain. that’s accounted for. it’s going to be around 70 positive 75% over the last decade — of course. because we’re playing with the numbers. we’re playing — i think the president understands the bond markets better than you do in that sees, you know, when the big budget — hold that thought. — that’s because you have — that’s because interest rates rise because the government is crowding out private demand for capital. that’s not what’s happening right now. no, no, no, they’re going down because the fed’s printing. exactly. i’m with you. right. but this is exactly the wrong time for further deficit reduction. the president understands that. precisely. new england a good time, is it? i think congress has started to recognize that, too, because republicans have come up with a list of demand for debt ceiling increase that doesn’t have anything to do with deficit reduction. they’re asking back for roll back of net neutrality, delay of obama care, various roll backs of environmental protection regulations — hois of representatives duly elected, are they not allowed to ask? they can ask for whatever they want. what it doesn’t to want do is enshrine this notion where can you ask for laundry list of demands and if you don’t get them you’ll blow up the economy — the economy’s not going to blow up. it hasn’t due — we missed debt payments and eventually we would have our interest rate — oh, you might say the president knows bond market better than me, but based on that comment, i don’t think you

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