unbiased, word for word, from the nation's capital to wherever you are, because the opinion that matters most is your own. this is where democracy looks like. c-span, powered by cable. ♪ >> c-span's campaign 2024 coverage your front-row seat to the presidential election. watch our coverage of the candidates on the campaign trail, with announcements, meet and greets, speeches, and events to make up your own mind. campaign 2024 on the c-span network. c-span now, our free mobile video app, or anytime online at c-span.org. c-span, your unfiltered view of politics. ♪ >> c-span now is a free mobile app featuring your unfiltered view of what is happening in washington, live and on-demand.

keep up with the day's biggest events with live proceedings from u.s. congress, white house events, the courts, campaigns and more from world of politics, all at your fingertips. also stay current with the latest episodes of "washington journal" and find scheduling information for c-span's tv network and radio, plus a variety of podcasts. c-span now is available at the apple store, and google play. downloaded for free today. c-span now, your front-row seat to washington. anytime, anywhere. ♪ robert with us this morning, the host of public radio full disclosure here to talk about the debt ceiling and u.s. economy. let's begin with a potential default if the senate cannot move quickly enough. guest: i don't think they are wearing, chuck schumer already

said he would rapidly sign it into the white house. i think so much of the brinkmanship and playing chicken element over the years, we originally felt this terror in 2011, the summer of 2011 when the united states had its credit rating downgraded by standard & poor's and the markets. think of how much the national debt has increased in the time cents. if there are lessons learned in moral hazard, it is hard for me to find them. markets are largely daunting about it and going back to thinking about the fed and other secular and economic issues outside of this. host: is that good for americans investing in the stock market that they are yawning? guest: i think it is problematic that people think maybe it is a cry wolf for chicken, something could go wrong. you had janet yellen having people take this serious and we might follow the cliff and we might run out of money.

who wants that lack i for the largest economy on the planet, the most creditworthy debt on the planet, the most support and interest rates, the greenback, u.s. dollar, everything involved. a manufactured self owned so you would think there would be much more fear, much more loathing, but it was rather muted this time around. host: you heard some house republicans saying she needs to show us her work and show us the numbers that we would actually default on june 5. where was the evidence that that was a risk? guest: there were numbers trickling out, but in terms of revenue in and checks going out, that we would hit that around that time. do you really want to hit up against that? you have to be mindful of how much money you have in the bank, you will make a massive purchase, drain it or put a down payment on a house, you don't want to do that if you have a couple grand in your bank account and this is the u.s. treasury. so much cash flow, money coming

in and out the door. you have to take her at face value. why could she not say july 4? this is serious and i think the brinkmanship on the other end, this is leverage. we have talked about it before. how may times under both parties cleaned up bills -- bills have been passed over the better part of the last 100 years? often times it gets politicized in weaponized, and i think peak anxiety was in 2011 and certainly seems like ancient history now. seems like fiscal cliffs and debt ceiling's and whatever metaphor you want to throw out, these things investors, mom and pop depositors and the like, they are focused on other things. host: you mentioned in 2011 the credit rating downgraded from aaa status. first explain what is it mean that we have aaa status and what does a downgrade entail? guest: aaa is the creme de la

creme. you are the honors ap plus student going great places, good for your money. it's kind of like aaa in shopping centers of starbucks, good for rent, predicable cash flows, not a risk of ruin. the united states is not a banana republic, it does not have a record of default like argentina or other emerging markets. so that gained over the course of decades and decades and centuries so you don't want to scrap that. that would affect your borrowing cost, getting a aaa rating to maybe a notch down, but even that relationship did not work because there is something extraordinary about the united states. when things go wrong, even when they go wrong here, it seems like people pile into our debt, not into the chinese yuan or the euro necessarily or bitcoin might have been it. or gold. united states treasury. it is indispensable.

that extraordinary status globally helps us keep borrowing costs low and the country, but looking at the debt ceiling now, looking at the national debt, we are rapidly paying a lot more in interest expense that i think was recently imaginable. it clips other vital social programs including medicare not too long from that. host: if united states were to be downgraded, then what would happen to the other economy going around the world. could it have any impact? guest: if you think the united states is less than aaa, should we scrutinize other countries? should we throw more money into european economy like switzerland. if they take treasuries and put it into other countries, this is the foremost interest rate on the planet, the united states interest rate, and borrowing

costs here, credit worthiness and affects our -- everybody up and down. it will not help those seeking imf bailouts but then again, this happened to us and it was not cataclysmic, like going off of the gold standard was not cataclysmic. that is a moral hazard. if people saw after that the things did fall apart in terms of our credit rating, it was unthinkable that would have been. are you really going to downgrade the united states, we moved on, and markets recovered. so what was the net lesson learned? host: we are talking with roben farzad of the public radio full disclosure. he is the host about the debt ceiling and u.s. economy. republican style in at facebook.com/cspan to join this ash (202) 748-8001. democrats, your line is (202)

748-8000. independents, (202) 748-8002. you can also text at (202) 748-8003. or join us on facebook.com/c-span and in a tweet with a handle @cspanwj. he said there was not much came back what we lost was there an impact on consumers or the economy? >> it was a pretty sad time. feels like ancient history but if you recall the summer and fall, the crises of what they called the big economies, portugal, italy, ireland, greece, spain, that credit crisis we had here spread across the pond and the european central bank has to quell that crisis, well into 2012 or 2013.

if you want to talk about the stock market and debt market, the pandemic changed everything, the world changed march 2020. worried about -- the weightlessness and seeing the plummet search go to 15 in a few days. and the government realizing there is no business interruption insurance generally. we see a risk of a deep recession, even a depression. it was so unprecedented and there is only so much you can learn from the late teens with the spanish flu, what they called it back then. the time of woodrow wilson. so you are not exactly thinking about the national debt, you are thinking about saving everything from catastrophe and collapse

and ppp, and certainly, between both administrations, the trump administration and biden administration, debt was an afterthought. and our borrowing costs were so low. if you saw what the 10-year treasury yield collapsed to, because in that moment of panic, everyone was piling into this readout of safety, the united states and government debt. that has changed a bit. the fed increased interest rates i think 10 times and we now see banking stress, all other difficulties. the united states can't necessarily take for granted it will be able to have borrowing at 1% ad infinitum. it is definitely a different world than it was a year ago. host: do the markets like there was a compromise here between speaker mccarthy and the white house, that federal spending or clawing back some covid spending was on the table? guest: yeah, but it is not going to make or break this. it will not put a dent into

things. i think the commentary from wall street analysts is more informative. the markets are speaking about the fed's battle against inflation. are they going to hike in the next meeting? are they going to wait and hike later in the summer? what about the banks? are they going to see more stress? there are so much money. the united states stock market still remains relatively expensive versus historically. is this money going to go loose to other areas? what is going to happen to housing affordability? what about commercial property and empty office spaces? even class a office properties, you know, the loans underlying them, are they going to default? is that going to be tougher for the banking sector? does eclipse the debt ceiling, which probably is in the rearview mirror until at least 2025 and the new president takes power. host: we are talking with roben

farzad this morning. we want to get your involved view in the conversation about the economics of this debt deal. let's listen to john in auburn, california, democratic caller. caller: thank you for holding this conversation all morning. i wake up early to hear you. i am inspired to write a letter or email would be quicker to my u.s. senators from california, padilla and feinstein. go for the bill, but you need to remove the mountain valley pipeline. why is that even in there? joe manchin, you know, we should take millions of what the industries are paying to him and have that pay down our debt. we need clean air. thank you. host: all right, we will go to will in atlanta, georgia, independent. caller: thank you for taking my call. when we came here and built this country, mr. jefferson determined that the deity

was a sovereign on the sense of the people who came here and said he was king of america and that was by thomas payne. we know the creator is the author of truth and justice so what we has is a congress who is being paid to connect us with our king through mutual consent and debate and argument and laws and the establishment of truth and justice. that is not being affected. i am an army veteran myself, 68 -- went in 1968, a true believer, to find out the same cia/fbi that she did this -- host: will, do you have a questions about the economics of this? caller: yeah. truth is the key. why keep using the term pandemic when we know it was a plandemic and it was the common flu

renamed as covid. that is a statistical fact. host: that is not roben farzad's expertise. we are talking about the economy. we will go on to joe in atlanta, georgia, democratic caller. caller: thank you for taking my call. i have a question about the relative cost. if i understand correctly, the debt is 31 trillion dollars, and our gdp is $26 trillion, but nobody ever talks about our asset base. the united states, if i understand it, is worth $100 trillion where we are $30 trillion in the stock market, and to $50 trillion in $40 trillion infrastructure. if we owed $31 trillion, but our asset base is $100 trillion, we are not in as much trouble as people think we are.

is that correct or do i not understand it? guest: that is a holistic aspect way of doing things. you would think, if the united states had an enterprise value, equity, debt, it will be analogous so much if you are a market investor, but the treasury deals largely with liquid asset, money coming in and out the door. there are other things you could calculate, how much is in the strategic petroleum reserve, how much gold we have on government lands, and the value of timber, the highways, the copper pipes and things, these are not immediately liquid things. you ideally want to balance your books and have expenditures roughly approximate what revenue is. but we know in an alexander hamiltonian world of credit, and credit extension, the economy will grow.

just like your earnings micro and the credit company might extend more credit to you over time, the united states to say a $1 trillion national debt, which might have been alarming as the 1800s are turning to the 1900s. it is a blip on the radar in 2023. i am not trying to diminish the $32 trillion number. especially when you look at net interest expense. the opportunity cost of that interest versus what could be spent on social programs for other things. you talk about health care, about rainy day funds, about high-speed rail. this is actually eating us. it is like in personal finance, if you have one credit card balance too much over time or you have student debt, and so much of your cash flow, so much of your economic activity is just to pay off the net interest on it, you're just treading water. and just running in circles. that is worrisome. but this is something that has

the fingerprints. of both the democratic and republican party and administration. and when people are in power and they have power in the senate and white house, by and large, this idea of fiscal hawkishness and fiscal prudence, that is put on the back burner. there is plenty of blame to go around. the other side of it is when the economy grows, and it grows quite well, look at the 1990's, there is nothing that fills up those coffers like economic growth and tax receipts coming into the fed. and capital gains and the like, capital formation. that is maybe where you see a bridge of the gap of cash flow versus the great points you make, the actual hard assets we have in the united states which would eclipse this debt amount that seems staggering now. host: van in el paso texas text you with this question, what would you say to people and politicians who compare the u.s.

economy to a household? guest: it is only so valid because the household, you know, there are people who going to economic distress or do credit card hopping or certain things, you think about your freshman in college she gets that credit card application, there is only so much systemic risk out of that. if it happens to one person, one household or two households, you have personal bankruptcies all the time or workouts with the banks or mortgage company. when it happens to the united states, it is filling the world's foremost economic engine. i know china is nipping at our heels but this affects every other interest rate on the planet, this affects just the defense budget in the united states. all the people of the united states expecting social security checks are expecting their medicare and medicaid reimbursements, the doctors out there, the functioning of washington, d.c.

the various other federal efforts and expenditures. that is immediately systemic in -- if the united states default s and cannot pay. the ripples are felt across the world in the banking system, which overwhelmingly the united states is still the world's banking capital. you are talking about a depression. it is only so analogous to family finances and one family having credit difficulty. the united states is still the number one economy on the planet and most important creditor, the most important government spender, so you don't want to risk that. it is unthinkable. it is one thing for it to happen to argentina or to thailand or to a frontier economy or the philippines. it is another thing for it to happen to something as a behemoth of the size of the united states economy. host: you mentioned what is going on with banks and the recent crisis with regional banks. what is wall street watching on this?

what are some of the vulnerabilities here? guest: it is really an embarrassment of riches. i keep saying it, if you told me the predictions for 2023 that we would have two of the biggest bank failures in history, you would say, why would that happen? try to interpolate it. i say commercial property or some sort of ridiculous event in this moment? no, there was so much cash on the sideline, companies were so flush and they were keeping working capital for so long that the banks got complacent with insurance limits and the $250,000 amount. they were vulnerable. when people suddenly whiffed vulnerability or a bank took paper losses on a government debt, the interest rate was high to what? 10 times the past year? you saw massively powerful and lucrative banks like silicon valley bank and others fail.

first republic it would have been inconceivable. it has only made the two other big banks like j.p. morgan and bank of america stronger. it is not quite over yet, especially if the fed is not on -- not done hiking rates. we have not had inflation for such a long time. there is not an institutional memory for these bank treasurers to not make basic, stupid finance 101 errors with depositor money. depositors can be ruthless and merciless, especially if you take the phone and move the money with a few strokes. it is not like showing up like "it is a wonderful life" and demanding access to your cash. these are all pixels moved to the left and right, and that can bring down capitalized institutions. it is liberating and terrifying. host: explain what happens for those that may be don't understand why these banks had these deposits and why it was risky and then the impact of increasing interest rates.

guest: interest rates had gotten so low for the longest time, for the better part of the century, there was just an interest-rate policy and the federal reserve had zero interest rate policies and there were various rolling crises, whether 9/11, the financial crisis, pandemic, that brought the federal reserve under several fed chair's to bring it down to zero. to stimulate the economy. when that happened, thanks to all of this cash, they want to put it to use. they are not getting anything for that cash and they might take a risk and go out further. the fed i think blindsided some -- so many people by taking rates from zero to what? 5.5% in a year? and when the publicly traded bank on an earnings call says, we have paper losses, if we have to sell these right now, it is not pretty. if you hold these treasuries, you will get your money back in maturity but to take a significant loss in the interim and to have to fess up on the bank balance sheets, that

spooked investors. so they took money out first and ask questions later. as this kind of circulated, everybody kept saying who's next, banks were getting taken out and shot, you see there stocks mentioned, and you see the lead of the nightly news and people are having that conversation of, should we take our money out of the smaller bank and maybe put it at a j.p. morgan, bank of america, or those already bailed out because they were too big to fail? it just kills the ecosystem of smaller community banks. they do not have a chance. they have to go raise money and increase their cd rates which should have been the way all around. banks should not have been able to get around, they feel like they are doing you a favor. when it becomes difficult for them to pay out a lot on deposits and turn around and not have great opportunities to capture good margin from what they're loaning out versus what

they are paying now, these banks are not losses, and that can be necessitated overnight, almost overnight, if people pull their money from the bank. host: we will go down to miami independent. , caller: good morning. i am a working-class guy, in my 60's, looking at retirement soon. in my career, i experienced 9/11. we did not see that coming and we took a big hit, the account crashed and there are people who were not alive or do not remember but, subsequently, we were kind of recovering from that shot, the peak of my career. we had the financial collapse which was also a huge economic disaster for people like me. and many others, especially retirees and those nearing retirement. we just had a pandemic, and somehow we seem to have emerged

from the pandemic, albeit with the debt and continued economic and social problems seems to be head and shoulders above our peers in the world. we are doing so much better. . ssets

whether it is junk bonds or risk assets. the bond market is offering you because the fed is taking rates higher. so you can get something closer to retirement. i've always said shed a tear for the favors alliterative over the last one he five years. we have had the long stretches of zero interest rate policy and it has been so skewed to those who are blessed and unfortunate enough and liquid enough to invest in stocks, crypto, real estate, artwork, farmland, everything is done well at times when the fed has been exceedingly stimulative, but it is ever harder to save money or put money out there, especially with inflation being so corrosive. you want to make something north of inflation so you are ahead of the game. it is really difficult of

interpolating. the stock market is having a difficult year. the s&p 500 is up 9% largely on the backs of a handful of mega cap trillion dollar plus valued companies. which had rebounds after last year. we also came off of one of the worst years in bond market history. i think time and time again, the lesson is if you diversify, don't put everything in one basket. if you have assets zig when others is that, you will hopefully do better than others in the long run. if you go back to the early 1920's, you do quite well if you can write out these things. think back to the 20 century, cuban missile crisis, vietnam, the gold standard, 9/11, crash of 1987, pandemic which even when i talked to people who went on to become doctors and public health people i went to college with, they did not study the pandemic that much. it came and hit us and was like a shock and maybe something like

that can happen again. maybe it will be another war. who knows. over time, the united states economy and markets assure themselves to be quite resilient. host: we go on to ralph, democratic caller. caller: good morning and thank you for taking my call. i want to talk about the deficit , the debt that is so high, 31 between dollars. you put a thing up earlier with the speaker that the debt 43 years ago was $1 trillion and now it is $31 trillion. over those 43 years, one party in particular has sold tax cuts. it does not make any difference whether the economy is going up or down, good, bad, or sideways. tax cuts, tax cuts, tax cuts, but they never cut spending. they actually increase spending while they're doing tax cuts at the same time.

i guess they think the boogie man pay for it. i am a boomer and how generation is basically the bulk of voters voted for this and created this. so we bear responsibility for fixing it as far as i'm concerned. host: let's get a reaction. guest: austerity is tough. if you look at the forementioned economies, what the european economies have to do, the sick patients and students, the student economies, portugal, ireland, spain, to get the bailout money of their finances, they have to agree to huge spending cuts. in public wage worker pull back and all of these things that are very difficult to the extent you see parties have been resurgent and populism has been researching. do you want to take the pain of cutbacks and austerity? think about the hit to the

budget right now. the fed seems to be in violent. these are hard things to hit. if you look at foodstamp welfare benefits and the like, they are small slivers versus the big kahuna's but certain things he just can't touch, they are politically toxic to both parties. it is very easy to talk about a strong dollar, debt cutting and be fiscally harsh -- caucus but in practice getting reelected and trying to hold onto the house or senate or whatever it is, it is brutally difficult to be true to your campaign. host: drew is in minnesota, democratic caller. caller: quick caller. -- quick question, thinking about social security specifically, and a lot of seniors -- i'm currently retired, county commissioner where we tried to make reasonable decisions to support our community.

social security has a huge role to play in our economy. i rarely ever hear people talk about the impact of if security was to be damaged or during one of these debt ceiling fiascoes have checks not go out to people who depend on the social security checks. some who are very frail and then they hear the things which gives them a lack of confidence in their leadership. i would like to hear the economic impact of rural communities and larger cities if social security was to go away. thank you. guest: you can't just pull it away overnight. you might be able to tweak the margins, might be able to increase the age of distributions or change the actuarial tables somehow but saying we are taking it away is

some are very frail. they hear these things and it gives them a lack of confidence in leadership. i would like to hear the economic impact on rural communities and larger cities if social security away. thank you. host: you cannot get rid of it overnight. you may be able to tweak the margins, increase the age of distributions or change the actuary tables somehow, but to say we take it away is according some sort of depression. -- courting some sort of depression. so many people have seen their checks garnished over time and to say i paid into it. there was an opportunity and i invested in it and did not have it for other things. you tell me i am not going to get it now, know that will not happen.

and that is -- congress and the white house. it is easier said than done. you look at the pension reform in france or the work week changing hours. that is a system, but in the united states social security unites older people and wealthier people who gave into it. they expected to the receive it and have it as part of their retirement. it is an adhesive to keep all sorts of classes united and popularity even though various people have the runaway growth of spending. it is not exactly been kept in a perfect lockbox. we have messed around too much and cross contaminated too many revenue streams. we deal with the mess that we have today. host: marty in massachusetts, democratic caller. you are next.

good morning. caller: i was looking at the writings and i am surprised we do not have a pristine credit rating anymore. i guess from the collateral damage that we have from 2011. i wonder how this affects the government in our personal interest rates. guest: it has had a muted response. there are several companies like aa companies and their stocks outperformed aaa companies. even those that had incredible credit readings such as ge, general electric, they were not as good and flush for the money as the rating agency predicted. the rating agency themselves are flawed. they have missed several debacles over time. the railroad, bankruptcies, we kn tweet, include the handle @cspanwj.