Frist a Shutdown, Next a Default
CAROL COSTELLO, CNN ANCHOR: Good morning. Thanks so much for joining me. I'm Carol Costello. For all of the concerns over the partial government shutdown, many say the real test comes in about nine days. I'm talking about the debt ceiling, which is like the nation's credit card limit. Congress spends the money while the Treasury Department pays the bills. But Congress spends more than the country gets in, in tax revenues and that's why fights over raising the debt ceiling happen. The latest standoff catching the eyes of some of the biggest names on Wall Street who are urging Washington not to play politics here.</s>LLOYD BLANKFEIN, CEO, GOLDMAN SACHS: There's precedent for a government shutdown. There's no precedent for default. We're the most important economy in the world. We're the reserve currency of the world. Payments have to go out to people. If money doesn't flow in, then money doesn't flow out. So we really haven't seen this before and I'm not anxious to be a part of the process that witnesses it.</s>JACK WELCH, FORMER CEO, GENERAL ELECTRIC: Both sides deserve a spanking for this. I mean the fact that they're not talking, haven't been talking for the last six months, it's (ph) terrible.</s>WARREN BUFFETT, INVESTOR: So a debt ceiling really doesn't make any sense. It makes absolutely no sense to let it be used as a lever for other things. I mean if you want to change laws on abortion or immigration or you name it, tax laws, whether, let that be a piece of legislation that people hammer out. But to tie it to something about whether you break the promises of the United States government to people all over the world, as well as its own citizens, just makes no sense. So it ought to be banned as a weapon. I mean it should be like -- it shouldn't be like nuclear bombs, I mean, basically, too horrible to use.</s>COSTELLO: Too horrible to use. Joining me now, Christine Romans, host of CNN's "Your Money," and Donald Ratajczak, an economics professor at Georgia State University. Welcome to you both.</s>CHRISTINE ROMANS,  CNN BUSINESS ANCHOR: Hi, Carol.</s>COSTELLO: Hi. So, Christine, I just want to start with this, because we heard what all of those high-powered brokered on Wall Street talked about, this would be catastrophic if Congress didn't raise the debt ceiling, yet we hear from some Republicans that this is nothing but scare tactics. And I'm going to read you a quote from Republican Congressman Ted Yoho. He said, "I think personally it would bring stability to the world markets since they would be assured that the United States had moved decisively to curb its debt." Does he have a point?</s>ROMANS: No. No. He doesn't have a point. I mean they think they're having some kind of intervention with the excess spending in Washington. That's something that's usually handled in a budget, not in a debit -- look, you -- say you and your husband are fighting about your household budget. You can't decide and he's spending more than you want him to or on things that you don't want him to. You don't then not pay your credit card bill because you can't decide on spending discipline in your own household. If you do that, your credit score will get dinged, your interest rates will go up and it will cause more financial havoc in your household. That's what this is. We have -- look, there -- some of the people, like Mr. Yoho, are talking about scare tactics. Let's not talk about scare tactics. Let's just talk about accounting. Simple accounting. There's $30 billion in the U.S. Treasury as of October 17th. Come November 1st, I'm looking at a whole bunch of payments that come out on the very same day. Let me show you what the Treasury Department, the checks they have to cut for Social Security, for Medicare, for payments for veterans. Look at -- on one day, Social Security supplemental income benefits, Carol. That's one day. There's not enough money in the bank to pay everything that's coming due. You hear people like Congressman Yoho and others talking about, you know, oh, well they'll just have to prioritize. You can't. There's not enough money that we finance the operations of the government. It would be instant austerity that many economists say could send us into a recession if they don't work this out.</s>COSTELLO: OK. So, Donald, I'm just throw another thing, that we often hear, by you. Some Republican congressmen said that if you raise the debt ceiling, you'll add to the deficit. The deficit will become larger. Is that true?</s>DONALD RATAJCZAK, ECONOMICS PROFESSOR, GEORGIA STATE UNIVERSITY: Well, actually, if we don't raise the debt ceiling, we may find that our interest burdens go up, so our deficits may rise. That's one of the funny things about this, that we're arguing about controlling government spending, but creating a problem that could dramatically raise our interest costs for years to come.</s>COSTELLO: So just to make this clear, because I think the debt ceiling is really hard for people to understand. So this is money that -- these are the bills we need to pay because Congress has already approved this spending. Am I right, Christine?</s>ROMANS: Yes, that's -</s>COSTELLO: Congress has already approved this, now they've got to pay the bills, right?</s>ROMANS: That's absolutely right. And here's the thing, they're using the debt ceiling. And, you know, this has happened before in the past where you use the debt ceiling to try to get other spending initiatives along the way. But the fact is, there's no budget. The problem is, there's no budget. The United States Congress has not passed a budget since 2009. The problem is not the debt ceiling. The debt ceiling is the symptom. The disease is the lack of a budget. And they're fighting on this -- over this thing that could send some very bad signals to the world. I mean, you know, China overnight, its foreign ministry, making some comments about how they hope the United States will raise the debt ceiling after all. You know, you talk about our foreign bankers, you know, the Chinese, the Japanese and, you know, lots of entities in the Caribbean Islands, but we are our biggest banker. The Social Security trust fund is invested in Treasury bonds. If we don't pay the interest on our Treasury bonds or we do just pay only the interest on our Treasury bonds but start to default on other obligations, like obligations to seniors, it sends a very destabilizing signal to the rest of the world.</s>COSTELLO: OK. And so - and it's not like we haven't grappled with this before. Remember just a couple of years ago Congress like grappled with raising the debt ceiling. And just the debate over that caused these things to happen. And we'll just review this. OK, in 2011, during the last debt ceiling fight, consumer confidence tumbled, the S&P; lost nearly 20 percent, small businesses cut back on hiring and our credit rating got cut for the first time ever. Why wouldn't Republicans think that would happen again if they didn't raise the debt ceiling? And they raised it the last time.</s>RATAJCZAK: Well, they did. And that didn't give us enough relief. In fact, prior to that battle, the U.S. Treasury had the lowest interest rate yields of all the major currencies in the world. Today it's the German Bund that has the lowest interest rates. We pay 0.8 percent higher than the Germans do. Now, remember, we paid lower two years ago. That alone adds almost $100 billion a year in interest payments.</s>COSTELLO: So - OK, so I'm getting the message from both of you, we shouldn't fool around with the debt ceiling, correct? Yes, Christine? Yes, Donald.</s>ROMANS: That's right.</s>RATAJCZAK: Yes.</s>ROMANS: You know, I understand the intervention. I understand trying to intervene in too much spending -- what they see is too much spending, but it could end up costing us more for this intervention than if we would just pass a budget.</s>COSTELLO: All right, Christine Romans, Donald Ratajczak, thanks so much for - to both of you for being with me this morning to talk about a very complicated topic. I appreciate it. Still to come in the NEWSROOM, sexual assault could happen to anybody. Now a new study suggests it's much more common among teenagers than you think. Up next, the surprising number of teens who say they committed an offense at a very early age.