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Roundtable: What Will Default Mean to Us?
Friday, July 15, 2011
What's going on in Washington DC may be political posturing - aimed at gaining the advantage in next year's election - but it could have an immediate effect right here in our community.
What's going on in Washington DC may be political posturing - aimed at gaining the advantage in next year's election - but it could have an immediate effect right here in our community. Seniors, veterans, business people are all growing increasingly anxious about what will happen if Congress wont stop the game of chicken and find a way to agree on raising the debt ceiling.
Guests: Dean Calbreath, economics reporter, San Diego Union Tribune
Kyla Calvert, education reporter, KPBS News
David Rolland, editor, San Diego CityBeat
CAVANAUGH: It's an insecure time as Congress plays pricks with the nation's economy. SDSU and UCSD both raise fees significantly again. And as I plan to remove cars from the heart of Balboa Park. This is the KPBS round table. It's Friday, July†15th. I'm Alison St. John. And with us today at the Roundtable are Dean Calbreath, economics reporter for the San Diego Union Tribune. Dean, great to have you with us.
CALBREATH: Glad being here.
CAVANAUGH: David Rolland, editor of San Diego City beat. Great to see you.
ROLLAND: It's good to see you Alison.
CAVANAUGH: And Kyla Calvert, who is the education reporter here at KPBS. Thanks for coming in.
CALVERT: My pleasure.
CAVANAUGH: What's going on in Washington DC may be political posturing, and gaining an advantage in next year's election. But it's having an immediate effect in our community. Seniors, veterans, business people all growing increasingly anxious about what'll happen if Congress won't stop the game of chicken and find a way to agree. And President Obama gave his second press conference of the week, calling on all sides to compromise. Do you have questions about how this could play out? Comments about how this could affect you or yours? Are you already taking action to protect yourself? Are you banking on Congress to come around? Our number here is 81-888-895-5727. Dean, let's start with you. What do you think the chances are that our government would actually decide to default on its debt?
CALBREATH: If I were a betting person, I would probably bet against it. I would probably bet that at the last minute, they'll suddenly find some compromise and be able to patch things together. But there is the strong possibility that people are going to dig in their heels. You get 300 -- almost 300 congressmen who find a -- pledged that they're not going to raise any taxes. You've got the -- not even gonna drop any taxes. You've got the White House on the other side that says we can't pay for this without at least raising a little money. So you've got strong water heads there. And somebody's going to have to back down.
CAVANAUGH: Explain exactly what's at stake here.
CALBREATH: What's at stake, if we actually defaulted, the big -- people are worried that there -- their paychecks will be disrupted, pay ups, federal contractors will be disrupted. That kind of thing would definitely happen. If we defaulted. I think those are really temporary problems though. I think the long range problem is that suddenly in the eyes of the world, we become a nation that can't keep its economic promises. And as a result, you've got a lot of people who -- including our finance ears in China and Japan, and India, who look at this and say this is not the best place to invest. We'll put our money elsewhere. So Americans have even more problems. And when we do borrow money from people, we have to agree to higher interest rates. Suddenly we are paying billions of dollars more in interest to foreign nations to pay them to loan us money. And as a result, interest rates will go up probably throughout the nation.
CAVANAUGH: And that is going to affect everybody.
CALBREATH: That would affect everybody. Of the short range hiccup, if this happens, yeah, you could see a short range ending of Social Security checks or Medicare payments. Or whatever. But I'm sure that if that happens, the government would have to as fast as possible stop that. But the longer range would be more cease.
CAVANAUGH: So David, how do you think that President Obama's handling this?
ROLLAND: Oh, I think he's handling it as well as he can, given the constraints of -- in Congress that dean laid out. Originally, I believe his original proposal was let's just do what we've done 70 some odd times in the last 40†years, and let's just raise that debt ceiling so we don't default. And then when there was resistance to doing that, to do something about the long-term debt, he came up with -- he and others came up with this idea for a grand compromise where we would cut some expenses from entitlements, and we'd also try to raise revenue. I think that was the right step to go to from there.
CAVANAUGH: He's up against this pledge that so many of the Republican Congress people --
ROLLAND: Yeah, nothing he can do. It's gotta happen by a vote of Congress. But we're talking about, from what I understand, we're talking about 44% of -- you know, of the -- of our expenses that would -- we would immediately not be able to pay as of August†2nd. And the way -- as you talk about long-term and short term consequences, I believe that would almost certainly plunge us into another recession.
ROLLAND: Right now we're talking about a national unemployment rate of 9%? If you're talking about people who have given up looking for jobs or are under employed, we're talking about 15 or 16%, and then all of these federal employees that suddenly have to be furloughed, suddenly cannot come into work. If they wanted to come into work hoping they could get paid later, there's some talk that that would be illegal.
CAVANAUGH: What do you think? Do you think most people are tired of hearing about this, Kyla?
CALVERT: Even just listening to our conversation now, I'm sort of struck by how dire the consequences of not raising the debt ceiling could there, and still there's sort of this sentiment among some Republicans that oh, let's not raise the debt ceiling. So we really need to bring down our spending, we don't have to default, necessarily, on our debts. So I don't know if that's something that dean could talk to you about why they're sort of -- that disconnect about just how serious it is.
CALBREATH: I'm going for the everyone else.
CAVANAUGH: Is there a valid economic argument to suggest that it might actually be a good thing to default on our debt as some seem to be arguing?
CALBREATH: I can't imagine a single valid economic argument. I think we came close to this point in 1979 for totally different reasons, and even at that time, even though it didn't -- even though it was way temporary hiccup, it cost us billions of dollars in extra interest rate payments. In 1979, of course, was the prelude to one of the greatest economic downturns for the nation since the great depression. It did -- that recession was probably going to happen anyway, but it definitely worsened what would have been a bad recession.
CAVANAUGH: 1-888-895-5727 is our number here at the Roundtable. And Barbara is calling us from Vista. Go ahead.
NEW SPEAKER: I was justice wondering, I don't know why -- and my question is, do you think it will be a good idea if the president used his bully pulpit and addressed and explained to everyone what is happening that you have something like oh, I would say a small number of -- a minority in the house who refuse to compromise on anything. They refuse -- if you look at European country, we just heard about Italy now where they're going to be raising revenues and also cutting back on expenses. There is a -- one western Europeans that that's been adversely affected by our, what I call a depression, our banking fiasco. And they have not -- and they've all raised revenues. You can't do it one way. And he doesn't do this. This is my main concern. You'd think if he addressed the American people and outlined everything, 'cause quite frankly, except for NPR and PBS, I don't hear both sides of any issue. If you listen to television, they avoid the issues completely.
CAVANAUGH: Okay, Barbara.
NEW SPEAKER: Say what is the problem, and he doesn't seem to connect with us.
CAVANAUGH: Very good point, Barbara. I want to throw that to dean, if you were listening to the president's speech this morning, he did, if you read between the lines, kind of say that, wouldn't you say? But you'd have to really know what was going on to hear it. Do you think he's not being direct enough?
CALBREATH: I think he could be more direct. I think that he has been trying throughout this to be -- to not work himself interest a corner. I think throughout this he has been trying to be a compromiser. He did come up with this plan. And a few months ago, the Republicans had a plan that you pay -- that you have 75% -- I think actually it's 85% of our budget savings coming from cutbacks, you have 15% coming from raising of revenues. He has compromised to the point where he's proposing 17% being raised in revenues, and they're lowered the debt to 0. He's very close to where the Republicans were seven months ago, and they keep moving the bar. It's like Charley brown with the football, he keeps pulling the football further out and further out.
CAVANAUGH: I want to sort of bring this back home a little bit here and point out that we have three Republican congressional representatives here in San Diego County, Darryl Issa, Duncan hunter, and Brian Bilbray who've all signed the taxpayer protection pledge saying to oppose any corporate or individual tax rate raise. Do you think it's so important that they just cannot move off it?
ROLLAND: I agree with the Union Tribune's editorial here today saying that signing such pledges are irresponsible. You participate yourself into a corner that you can't get out of this. Then you gotta explain to your constituents why you're waffling and going back to a pledge. It's important to note here that they don't have to raise taxes to raise the debt ceiling. This is a crisis of our own making. We can avert economic controversy by simply raising the debt ceiling. It's an arbitrary number. We can just raise it.
CALBREATH: We did it eight times during the bush administration.
ROLLAND: Yeah. The leaders among the Republicans, the people that we're hearing from, I think Carney, the president's press secretary laid out exactly how many times each of them had already voted to raise the debt sealing. I think those people though are kind of the adults in the Republican party and they habitually raise the debt ceiling.
CAVANAUGH: I think the president is saying not only I want to raise the debt ceiling, but I want to tackle the deficit.
ROLLAND: Yes. But they can be separated. They don't have to be linked. You can raise the debt ceiling without tackling -- I mean, yes, it's fiscally responsible to start doing something about the debt. But they don't have to be risked. You can raise the debt ceiling and then tackle the debt, and then you can argue until the cows come home about revenues versus expense cuts.
CAVANAUGH: I'd like to bring in another caller here. 1-888-895-5727 is our number, Mike is calling from the 805. Go ahead.
NEW SPEAKER: I think the media coverage on this has been skewed to the right. My understanding is that the president doesn't want to raise taxes for -- and he wants to just roll back the rush tax cuts for very wealthy individuals. And also peel back some tax credits for oil companies that are making record profits. But every time I hear this issue being discussed, the more generic term of tax increases is used. And I'm disappointed in PBS and CNN, MSNBC is the only place where I feel like I'm hearing the truth.
CAVANAUGH: Okay. So Mike -- dean, are you understanding, Mike's question is about the fact that --
CALBREATH: Yeah, I -- I don't know whether -- I'm not going to take a position on what news agency is doing a better job. But no, the point is well taken. These are tax credits, largely that the president wants to remove. It's not like he's gonna be as raising taxes on everybody. Some of the tax credits are for -- for tax credits of corporate jets. 98% of the American people do not get affected by that. And yet this is something that Eric Tanser, the head of the Republican party in Congress, something that he has refused to do. The simple little measure that affects a very, very small%age of the American public. It's just -- we will not remove these tax credits, we will not --
MAUREEN CAVANAUGH: In fact this morning the president did say he feels 80% of the public is on board with his compromise.
CAVANAUGH: So perhaps the media is not doing such a bad job if basically people are very much aware of what's going on and want to see a compromise.
CALBREATH: Poles show that people would be up for some reasonable taxes in order to solve this problem.
CAVANAUGH: Okay. Well, I wish we could talk about this longer. But we've come to the end of our time here. I guess I would sort of ask, would you still be voting for your Congress person if they reneged on their pledge? Both the Republican side and the democratic side. Of it seems like it's time for us to be showing our Congress people that we are looking to them to reach a compromise.
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