Meet the Press   |  October 06, 2013

Lew says potential US default ‘very dangerous’

Treasury Secretary Jack Lew said US ‘on the verge of going somewhere we’ve never been’ if Congress fails to raise debt ceiling.

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This content comes from Closed Captioning that was broadcast along with this program.

>>> 6. government shutdown . no agreement in sight. senator rand paul will be joining me from kentucky in a moment, but first let's turn to treasury secretary jack lew here in washington. mr. secretary, good to see you.

>> good to be here.

>> we're six days in. has there been any permanent damage to the economy from this shutdown so far?

>> savannah, the shutdown is harming people every day. i think we're seeing that in the ironic actions of those who chose to shut the government down item by item, trying to reopen the government for things as they discover there's real pain out there. if the shutdown ends quickly, we'll recover from the damage. if it goes on for a longer period of time, it will do more harm.

>> given what you know of the terrain, are you looking at a few more days of a shutdown? are you looking at weeks?

>> congress could act today. the optimistic view of things is there is a majority in congress right now that would vote to reopen the government. they just need to bring it up for a vote. they could bring it up today.

>> there was a senior administration official quoted in the wall street journal this week saying, quote, we are winning. it doesn't really matter to us how long the shutdown lasts, because what matters is the end result. does that reflect the view of the administration behind closed doors , the shutdown can go on as long as it wants because it's politically advantageous.

>> there are no winners here. every day it's shut down, it does real harm to the american people , and you need to step back and look at where we are as a country and kmaen. the united states has been fighting its way out of a recession since the great depression. if you're a parent relying on head start or somebody looking for medical care or a government agency that needs intelligence, they need to open the government up. they could do it today.

>> you mentioned republicans have passed a series of bills in the house to fund parts of the government such as fema, such as the va. why not take them up on that off offer?

>> it just doesn't work. they need to open up the whole government. you can't cherry pick an item here, an item there. there are too many important things the federal government does, and they need to open it up, and they could because a majority is ready to do it. i started out my career in washington working on the hill. i worked for speaker o'neal. he said the one thing the american people won't tolerate is obstructionism. the majority needs to be given a chance to work as well.

>> as you know, we are facing a more potentially disastrous deadline, october 17 for the nation's borrowing limit for the debt ceiling to be raised lest the country default on its obligations. let me put this to you very, very clearly. is october 17 also the day the country defaults?

>> let me be clear. we actually hit the debt limit from may. from may until this week, we've been using what are called extraordinary measures to create a bit of additional headroom. on tuesday i informed congress that i had used the final extraordinary measures, there are no more. we are now limited to the borrowing capacity we have today. on october 17 , we will exhaust our borrowing capacity. and at that point i have nothing else in the drawer.

>> does that mean default happens that same day?

>> on october 17 , we're left with cash on hand. i told congress that i believe there will be approximately $30 billion of cash on hand, which is a lot of money, and it sounds like a lot of money to the american people , but you have to put it in the context of the cash flow of the united states . we are a $4 trillion enterprise, and on any individual day, you could be 50 or $60 billion cash flow negative or positive. $30 billion is a dangerously low level of cash, and we're on the verge of going into a place we've never been and not have cash to pay our bills.

>> i guess the question, then, for you not raising the debt ceiling, is that tantamount to default whether it's in a day, a week or a month?

>> the reality is if we run out of cash to pay our bills, there is no option that permits us to pay all our bills on time. which means a failure for congress to act would, for the first time, put us in a place where we're defaulting on our obligations as a government because of congress failing to act.

>> if this country were to default on its obligations, what would be the consequence in the economy? are you talking catastrophe?

>> we've never crossed this line, so everyone is speculating on what happens if the unthinkable happens. let me just read to you from what president reagan said when he faced this, and i quote. the full consequences of a default or even the serious prospect of default by the united states are impossible to predict and awesome to contemplate. d denigration of the united states would have a financial effect on the markets. why would anyone take that risk?

>> it would be calamitous for the economy?

>> it would be awful. even getting close to the line is dangerous. in 2011 , there was no default in 2011 . it hurt the economy to get close to the line. we saw it in the stock market , we saw it in confidence, we saw it in investment. if we cross the line, we're going a place we've never gone. it's very dangerous.