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By Mick Krever, CNN
An American default on its debt could do “nothing good” for the economy, either in the U.S. or abroad, Former Republican Senator Judd Gregg told CNN’s Christiane Amanpour on Monday.
Gregg spoke with Amanpour as the U.S. faced dual financial crises: An impeding government shutdown imposed by a congress unwilling to fund the government, which could come Monday night, and a possible default on the government’s debts, which would come in about three weeks.
It is that second problem, a default on America’s debts, that would be the much “bigger problem,” Gregg said.
“It would,” he told Amanpour, “obviously [have] significant ramifications for the country and for our fiscal policies.”
There are a group of Republicans in the House of Representatives who do not want President Obama’s healthcare reform – dubbed Obamacare – to go into effect, and are willing to do anything possible to block it.
Congress itself approved Obamacare, the president’s signature legislative achievement, when it passed the bill three years ago and made it law
“The problem here is very fundamental,” Gregg said. “There are two things which are not negotiable. One is killing Obamacare. The president is obviously not going to agree to do that – that’s his signature proposal. And Republicans aren’t going to agree to raise taxes.”
“If they try to reach an agreement on those two grounds, agreement can’t be reached,” he said. “But there’s a huge area in between those two points, such as reforming our entitlement systems or just doing very targeted action in the area of spending restraint that could be accomplished, and which could be part of an agreement for increasing the debt ceiling.”
Gregg said that responsibility for the impasse lies with both Republican and Democrats, blaming the president for failing to negotiate with his congressional colleagues.
But it was clear that the former Republican senator saw much fault within his own party.
“There are a few people in our party who don’t seem to understand the process of governing,” he told Amanpour.
“I think they’re pursuing it for personal political gain,” Gregg said. “There’s a very small group of folks in our party who are gaining significant national attention, and they’re raising a huge amount of money” by saying that they won’t increase the debt ceiling unless Obamacare is delayed or repealed.
But not only would a default be terrible for the economy, he told Amanpour, it would be politically bad for Republicans as well.
“The Republican Party would be the loser in a shutdown” – the first problem – “and it would be the dramatic loser in a default,” the second problem, he said. “It’s sort of like that like from Man of la Mancha where Sancho Panza says ‘Where the rock hits the jar [or] the jar hits the rock, the jar loses.’ And in this case the jar is the Republican Party.”
Fourteen trillion dollars of national debt is a lot of money, even for the world's largest economy. Interest rates have gone up almost one percentage point in a few months, which translates into an annual servicing cost of $ 140 billion. Raising the debt ceiling repeatedly is simply like kicking the can further down the road. Either raise taxes or cut spending, preferably both in moderation.
We're still in a recession, scratch that, a Jobs Crisis. We have an emergency, and until that emergency is fixed we cannot balance a budget. If you have a hole in your roof, good luck "budgeting" that in. Once the jobs come back and the power of the dollar somehow rebounds, the hole in the debt will fix itself.
"Whether the stone hits the pitcher, or the pitcher hits the stone, it's going to bad for the pitcher." But close enough!!
Thank you grasshopper...thank you..
Everyone is screaming to raise the debt limit so the US does not go into default. Yet as time passes and the debt continues to climb, is anyone really looking at stopping the growth of the debt? Yes, we can avoid defaulting on payment and the world economy "will be saved"-but how long is it before the weight of the debt itself causes the collapse of the economy-US and world?
If we went back to some of the founding financial practices of the country, we could cut spending by millions. Elected persons should get their own paying jobs, create their own companies to hire others, pay for their own healthcare and office space. Even then you could cut taxes and still have money to pay off the debt. The non-politicians must step up and say "we will not give you a free ride anymore, this country is just as much your responsibility to fund as it is ours."
USA; Looking more and more like Rome every day. Its gonna be a hard landing and the rest of the world is just watching and hoping it dont cause too much of an earthquake.
Not raising the debt ceiling will worsen a still fragile recovery. The US will get a downgrading in its rating, which will have long-term detrimental effects. Reagan did raised the ceiling more than a dozen times in his eight years. Americans go into massive debt all the time. People who buy a home for the first time, enter into significant debt for 30 yrs - b/c that's one of the best ways to grow their own wealth. Most people have far more debt than assets for many years after they begin a mortgage. Likewise for doctors graduating from medical school. If repayment is planned for appropriately and income also rises – going into debt is the heart of Capitalism. Start-up businesses operate on that model too – betting current debt against future earnings. Problem is the GOP refuses to consider raising taxes to bring down the debt.
I completely agree with Judd Gregg on this. The economy is recovering and this is not the time to tie budgetary ceilings or healthcare ceilings. Focus on what is good for the nation, for the people and the results will show. These petty politics for personal spotlight is destroying this great nation.
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