[Candy Crowley, Cnn Anchor:] If you want a friend in Washington, get a dog.
[Crowley:] Today, they call him Speaker Cruz. It's not meant as a compliment.
[Cruz:] So many Democrats have invoked my name as the root of all evil in the world.
[Crowley:] A marquee name in the Tea Party takes on incoming from the other parties. Our exclusive with Texas Republican senator, Ted Cruz. Then
[Barack Obama, President Of The United States:] Take that vote. Stop this farce.
[Rep. John Boehner,  House Speaker:] All we're asking for is to sit down and have a discussion.
[Crowley:] The U.S. government is close to $17 trillion in debt and this Congressional authority to borrow more. Treasury secretary, Jack Lew, joins us on Washington's double trouble, showdowns over the shutdown and the debt ceiling. Plus, is anybody winning or is everybody losing? Our political panel considers it all and weighs in on a way out. This is STATE OF THE UNION. Good morning from Washington. I'm Candy Crowley. Five days into the government shutdown, there is some movement. The Pentagon is bringing most of its civilian employees back to work starting this week. The House approved a measure guaranteeing back pay to furloughed federal workers, and a senior House Republican tells CNN they're floating the idea of the bill that funds the government and lifts the nation's debt ceiling for six weeks. The measure would not be tied to anything about Obamacare. And that might not sit well with Senator Ted Cruz. His take on this in a few minutes. But first, my interview with treasury secretary, Jack Lew, moments ago. Treasury secretary, Jack Lew, is here. Mr. Secretary, thank you so much for coming in.
[Lew:] Great to be with you, Candy.
[Crowley:] If I can just sort of sum up what you've been saying, and that is come October 17th, you have run out of tricks, although, you don't use that word, but ways that you can sort of massage the numbers to keep it going so that you don't go over the debt ceiling the Congress has set. You need a new debt ceiling by October 17th. What happens on October 18th if you don't get it?
[Lew:] Well, it's a very good question, Candy. And just to be clear, we crossed the debt limit in May. Since May, we've been creating some room to borrow by using what are called extraordinary measures. They've been used so many times. They're not as extraordinary as they used to be. Tuesday I wrote to Congress saying I used my last extraordinary measures. I have no more. That means that on October 17th, we'll run out of the ability to borrow. We'll be left with some cash on hand. And, I've told Congress it will be roughly $30 billion. And $30 billion is a lot of money. But when you think about the cash flow of the government of the United States, we have individual days when our negative or positive cash flow is 50 or $60 billion. So, $30 billion is not a responsible amount of cash to run the government on.
[Crowley:] where you're telling me that nothing would happen on the 18th?
[Lew:] Well, I can't tell you. We never got to this point, Candy, you know? We've never gotten to the point where the United States government has operated without the ability to borrow. It's very dangerous. It's reckless, because the reality is, there are no good choices if we run out of borrowing capacity and we run out of cash. That will mean that the United States for the first time since 1789 would be not paying its bills, hurting the full faith in credit because of a political decision.
[Crowley:] Let me play you something that Congressman Steve King of Iowa, a Republican said, talking about the possibility of servicing the debt past this deadline.
[Rep. Steve King,  Iowa:] I don't think the credit of the United States is going to be collapsed. I think that all this talk about a default has been a lot of demagoguery, a lot of false demagoguery.
[Crowley:] So, the question is, is it technically possible for you to keep up with your debts? Can you not just pay the interest rate on these debts while this is worked out?
[Lew:] Candy, I got to tell you that anyone who thinks that the United States government not paying its bills is anything less than default hasn't thought about it very clearly. Let me ask you a question. Let me ask you, what happens if we're not able to pay Social Security? What happens if we can't pay disability and veterans payments on time? Medicare and Medicaid. In each of these cases, it means these families, businesses, institutions that are important won't be getting what they're relying on
[Crowley:] Coming on the 18th, you won't be able to pay Social Security, you won't be able to pay Medicare, you won't be able to pay all of these things?
[Lew:] I'm telling that you that on 17th we run out of our ability to borrow, and Congress is playing with fire. If they don't extend the debt limit, we have a very, very short window of time before those scenarios start to be played out.
[Crowley:] Could you keep up on servicing the debt, that is paying the interest on the U.S. debt, therefore, not defaulting as you contend?
[Lew:] Candy, if the United States government for the first time in its history chooses not to pay its bills on time, we will be in default. There is no option that prevents us from being in default if we don't have enough cash to pay our bills.
[Crowley:] But very often, in bills and correct me if I'm wrong, can you not pay the interest? I'm just trying to figure out wiggle room, because what Republicans are saying, is these guy do this all the time as we run up. Look at Wall Street. It's kind of looking at it. This doesn't seem to be that big of a deal this time around. No one's been threatening to downgrade the U.S. credit worthiness. So, the question is, is it true, as they say, that you can service the debt beyond the 17th?
[Lew:] Candy, let me put this in context. We are the strongest, most important economy in the world. We've already seen that when government shutdown, the kinds of gridlock and brinksmanship in Washington hurts people and it hurts the economy. We saw it in 2011. What happened is we approach the point of reaching the debt limit. You now have people who are saying, oh, it won't be that bad. Well, I challenge them to answer the questions that I asked you. They're willing to concede if we don't pay interest and principal on the debt if that's bad. Well, you know, it is bad, but there are a lot of things that are bad. You can't pay all the bills if Congress doesn't raise the debt ceiling. And none of these bills are new. These are commitment that Congress made that's paying old bills. It would be like somebody saying I ran up my credit card and I decided not to pay it. You can't do that. The United States government is just too important to the world. Our currency is the world's reserve currency.
[Crowley:] Is this could the president, is there a mechanism and I think we went through this last time around in 2011. Is there a mechanism for the president should the U.S. be unable to pay its bills? Is he able to unilaterally lift the debt ceiling?
[Lew:] I think the White House has spoken quite clearly to this the president does not have the authority to take action in that kind of a way the president consulted with his lawyers, and that's the conclusion that he's reached. You know, there's a desire here for there to be some kind of a magic solution. There's an easy solution, Candy. A majority in Congress would do the right thing if given a chance to vote to open the government. A majority in Congress would do the right thing if given a chance to let us pay our bills. Congress needs to work. They need to do their job, but the majority needs to be given a chance.
[Crowley:] If it is as bad as you say it would be if this happens, if they don't raise the debt ceiling Congress doesn't raise the debt ceiling by the 17th, why wouldn't the president come to the negotiating table? If it's going to ruin it's going to shake the world markets, if it's going to ruin our credit worthiness, you know, we're the superpower. We can't be not paying our debts. If it's that vital, why isn't he at the bargaining table saying what can we do here?
[Lew:] Candy, I think you know that the president has been, is, and will always be looking for that way to negotiate to find a sensible middle ground. He did it in 2011. He did it last year. He did it this year in his budget where he put forward tough policies.
[Crowley:] If this is so dire, why not do it again?
[Lew:] You know, I think if you look at where we are right now, we've just gone through a couple of months where some very extreme parts of Congress to control. I don't think the leadership in Congress wanted a government shutdown. They ended up with a government shutdown because of the tactics of an extreme group trying to say, we're willing to do real damage if we don't get our way. The president's message is clear. Congress needs to its job. They need to open the government. They need to make us to pay our bills and then new need to negotiate. And he is very much prepared to do that.
[Crowley:] the president still won't sit down. I mean, it's like it just seems like a duel message here. It's really, really important. Horrible things are going to happen if this isn't fixed, but I'm not going to negotiate.
[Lew:] You know, Candy, in 2011, there was a very dangerous turn in the political debate in Washington. You had the same 50 to 100 members who were really willing to default if they didn't get their way. I've been through a lot of budget debates. I've been through a lot of debt ceiling debates. Never did I hear people who said if it don't get my way, it's better to default. That's not acceptable now
[Crowley:] Let me turn you quickly to the government shutdown, and in particular, you have inside the treasury department, the unit that monitors sanctions and imposes sanctions on those who try to help Iran or Syria militarily. We are now told that that office has been gutted, that it can no longer do its job because of the shutdown. As you know, Congressman Ed Royce, chairman of the House Foreign Affairs Committee wrote you a letter said wait a minute, you said that you certainly would make sure that all vital activities of the government go on. And then, he said, "This recent staffing decisions leave me puzzled. I respectfully ask that you reconsider these ill-advised staffing decisions that undermine support for vigorous Iran sanctions and other critical national security efforts." It does seem that this fits under the classification of essential. If the president is going to say Iran came to the table because we imposed and enforced sanctions, why you would let all but 17 members of that 100 plus office be furloughed?
[Lew:] You know, Candy, there's a simple solution here. Congress needs to vote and open up the federal government.
[Crowley:] But did you have to furlough these people? I understand you want the government open.
[Lew:] You look around the government, there are people with essential functions who are not coming to work because not everything that meets the common sense test of essential meets the legal test under a government shutdown. These people do very important
[Crowley:] that the president's ability to carry out foreign policy certainly with Iran who we worry about nuclear weapons
[Lew:] I think the work is very important. I think Congress is irresponsible and reckless for shutting the government down, but they also need to understand when they shut down the government down, there are consequences, because we don't have the legal ability to bring everyone back.
[Crowley:] Treasury secretary, Jack Lew, thank you for coming by. We are back now with Senator Ted Cruz. I do believe, senator, that he was sort of referring to you in some of those remarks about the extreme members of Congress that they people that they characterize as extreme shutting down the government to the harm of the U.S. The debt ceiling. How should Republicans approach that?
[Cruz:] Well, I mean, let me commend actually Secretary Lew for not being willing to demagogue on the debt ceiling the way sadly his boss, President Obama, has. If I counted it right, three times you asked him directly come October 17th, will the United States default on its debt? And three times, he avoided answering. And the reason is the answer is, of course not. Now, frankly, what I wish he said and what any responsible president would say is you come out and say under no circumstances will the United States ever default on its debt. That should be the answer. But Secretary Lew at least went half way there by refusing to repeat the claim that President Obama's made that there is some risk of our default
[Crowley:] But would you agree that it's not good for the U.S. not to be able to borrow past where it is, because at some point, it will have to default. How should the Republicans handle the debt ceiling? Do you want some, for instance, faction of the president's health plan to be attached to that in exchange for lifting the debt ceiling or because it's so important, should Republicans say we need to lift this debt ceiling?
[Cruz:] Look, in my view, the debt ceiling, we should look for three things. Number one, we should look for some significant structural plan and reduce government spending. Number two, we should avoid new taxes. And number, we should look for ways to mitigate the harms from Obamacare. You know, since 1978, the debt ceiling has been raised 55 times.
[Crowley:] So, you think that some facet of the president's health care plan should be attached to an increase in the debt ceiling?
[Cruz:] The debt ceiling historically has been among the best leverage that Congress has to reign in the executives.
[Crowley:] So, yes?
[Cruz:] Yes. Yes.
[Crowley:] And what else?
[Cruz:] But my point is that there's great historical precedence. Since 1978, we raised the debt ceiling 55 times. A majority of those times, 28 times, Congress has attached very specific and stringent requirements, many of the most significant spending restraints things like Gramm-Rudman, things like sequestration came through the debt ceiling. And so, the president's demand jack up the nation's credit card with no limits, no constraints, it's not a reasonable demand.
[Crowley:] How far are you willing to go because I'm going to imagine that a number of your Republican colleagues as well as all the Democrats are going to say we cannot mess around with the debt ceiling here. It's too important. It's in a bad message. It will rock the economy. Let's increase the debt ceiling for X amount of time or X amount of dollars. How far would you go to stop that in order to eke out
[Cruz:] Look, in my view we ought to have one fight at a time. So, we're right now in the middle of a government shutdown.
[Crowley:] But it's all going to pull together. You would agree with that.
[Cruz:] It may or may not. I don't think it should. I think we still got some time on the debt ceiling. And I think right now, we need to deal with the fact that a significant percentage of the government is shut down because Harry Reid and President Obama have refused to negotiate. And you're seeing House Republicans over and over again passing reasonable bills to open vital government services and President Obama and the Democrats refusing to negotiate. We have to focus on that first, because that's the immediate challenge.
[Crowley:] Well, I I grant you that both sides see the other side as at fault here. But that's about blame. I think what the American people want to know is, where does this end? You talked last night you were at a Virginia republican event in Richmond and said Republicans will win this. And by that, I believe you meant what you wanted in exchange for a spending bill. What does win this mean to you? What does that have to look like for a Republican victory?
[Cruz:] Let me be clear, I didn't say Republicans will win this. Listen, I think career politicians in both parties have been part of the problem. What I said is the American people are going to win. And that's something very
[Crowley:] What does the American people win look like to you?
[Cruz:] Look, what the American people want is they want our government funded and they want to stop the harms from Obamacare. Obamacare is hurting millions of people. It's killing their jobs. It's forcing them into part-time work. It's driving up health insurance premiums, and it's causing millions of Americans to lose or risk losing their health insurance. That's a win for the American people is actually responding to the real harms that are coming from Obamacare.
[Crowley:] So, let me show you some polling that was done recently. And the question encompasses both of those things you just talked about and that is, do you believe, the question is, that in order to change Obamacare defunded the government should shut down if that's the price for getting it done? And the CBS poll basically showed 72 percent totally disapprove of that tactic. So, if we're listening to what the American people want, they don't want a government shutdown simply because there are differences over the health care law.
[Cruz:] But Candy, as you phrase that question, I'm in that 72 percent. I don't want the government to shut down. I've said that throughout. And the reason the government has shut down, you know, you mentioned in fact earlier you guys ran a graphic on the screen both sides refuse to negotiate. And look, I understand the natural reaction you see an impasse in this sort of natural reaction is, well, both sides are to blame. But I don't think the facts support that, because if you look, the House Republicans repeatedly had been compromising, had been passing one bill after another, first of all, on Obamacare itself, and then secondly, working to restart vital government functions. And the Senate Democrats over and over again and President Obama has said they won't negotiate. They won't talk. They have not moved one inch. And when you've got one side that's compromising the other side that isn't, I don't think it's an accurate or fair description to say that neither side is negotiating.
[Crowley:] But it is accurate to say is it not that absent the Republicans attaching things to do with the president's health care act, a clean CR would have gone through? That's accurate, correct?
[Cruz:] That's actually not Accurate. So, for example, you played the president saying let's have a vote. Let's stop the farce. I agree with President Obama. There are eight bills that the House has passed that are piled up on Harry Reid's desk. And Harry Reid will not let the Senate vote. So, for example, Jack Lew, Candy, said we need to fund our veterans and disability payments. I agree. The House passed a bill to fund our veterans. Every Senate Republican believes we should fund our veterans regardless of what happens in the shutdown, our veterans shouldn't pay the price. And right now, Harry Reid and the Senate Democrats are refusing to have a vote and they're blocking it. The only reason the VA is not adequately funded right now is because Harry Reid and the Democrats are blocking it. That's not reasonable.
[Crowley:] How about a cooling off period? There's this idea being floated CNN is reporting kind of a cooling off period, that you pass a clean spending bill for six weeks, and on it, you also increase the debt ceiling for six weeks. And in that six weeks, you negotiate on how to fund the government for the rest of the fiscal year and you negotiate the debt ceiling.
[Cruz:] Candy
[Crowley:] That would accomplish, would it not, what you want, which is the president at the table?
[Cruz:] Look what you just asked. You said how about the agreement be give the Democrats 100 percent of what they want with no changes whatsoever. They're not talking now, but if you give them everything you want, then they'll talk. No, they won't. Look, we saw this week President Obama after months of refusing to talk to Congress finally invited Congressional leaders over, sat down and said hi, I invited you here to say I will not negotiate. Their view is not reasonable. It is Republicans in Congress who are passing bills to reopen the parks, to reopen the memorials, to fund cancer research, to fund our veterans, and it is the Democrats who are refusing to have a vote. I mean, Candy, why won't Harry Reid let the Senate vote on the eight bills the House has passed to fund vital parts of the government?
[Crowley:] I think he would say because he thinks he's being blackmailed, but I want to continue this conversation. We'll be back. We got to take a quick break. We want to talk about a couple of things when we return. I also want to talk about some of the blowback you're getting from members of your own party. They reportedly gave you an earful behind closed doors saying you don't have an end game strategy and you're, quote, "selling snake oil." Your chance to respond after this.