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Brian Lehrer: It's The Brian Lehrer Show on WNYC. Good morning, everyone. Today, according to Treasury Secretary Janet Yellen, is an important day for our country. It's the last day the United States government has the money to meet its debts. She cited tomorrow, Thursday, as the day the government would run out of money to fully repay people who hold government bonds and other US debt. That is a big deal. The safest investment in the world is considered to be US Treasury obligations, right?

Now, this happens periodically. Congress raises what's called the debt ceiling so the government can pay back the money that it has already borrowed. You've probably heard that the new Republican Congress wants to tie raising the debt ceiling to certain spending cuts so the debt doesn't just keep going up or going up as fast. Democrats say playing politics with the creditworthiness of the United States government is to court economic disaster for everyone's 401(k)s and everything else. President Biden says no negotiations on this.

You can be excused for being confused. What actually happens tomorrow, according to Janet Yellen, that she cited Thursday, January 19th? What does she mean by the term "extraordinary measures" that can put off the reckoning by a few months? She says around June, although that's depending on a few things. What is responsible borrowing and spending and taxation to pay for it and isn't politics how that gets decided?

With me now to explain the money and politics of the debt ceiling and why Treasury Secretary Yellen put a big mark on the calendar for tomorrow is John Cassidy, New Yorker magazine staff writer since 1995, who has seen a few debt ceiling political battles and fiscal cliffs come and go so far without a national default, and is author of two books, How Markets Fail: The Logic of Economic Calamities and Dot.Con: How America Lost Its Mind and Money in the Internet Era. John, always good to have you. Welcome back to WNYC.

John Cassidy: Thanks, Brian. Delighted to be here.

Brian Lehrer: Can you just define the debt ceiling first? What does the term actually refer to?

John Cassidy: It refers to a piece of legislation that was first passed in 1917 actually more than 100 years ago. Ironically, Congress passed it to make the government issuing debt easier because in those days, Congress had to approve every individual debt issue or close to that. To make things easier, they consolidated into one bill, which would set a limit for how much debt the federal government could introduce.

It wasn't meant at that stage to be a strict cap. It was supposed to make things earlier. Easier rather, sorry. Over the decades, though, it's what it's turned into, really. It's basically in more recent decades. It's just a political weapon for the Republicans to use when they're out of office to try and make things difficult for the administration and to try and put a limit on spending and debt issuance. It's a piece of legislation basically.

Brian Lehrer: When Treasury Secretary Janet Yellen named tomorrow, which is also my father's birthday, happy birthday, Dad. It's just not as big a national deal as what Janet Yellen has done. Sorry, Dad. When Treasury Secretary Janet Yellen named tomorrow as the day the government would hit the debt ceiling, what does that mean?

John Cassidy: Well, congratulations to your father. What it means is that the actual numbers are going to run up against the debt. The Treasury issues debt on an ongoing basis. If you look on the Treasury website, you'll see debt auctions taking place all the time. The national debt is now very large. It's about 31-point-- get over $30 trillion. The debt limit is $31.7 trillion. Technically, we're going to reach that tomorrow, Yellen said. I don't know if it will be exact, but it'll be close. Now, that doesn't mean that we're breaching the debt ceiling because your next question will be, what does it mean by extraordinary measures she talked about?

Brian Lehrer: Wait, you read my script.

John Cassidy: [laughs] Because there's so much money coming in and going out, it's a huge operation. The Treasury can manage things, so we don't actually go breach the debt ceiling for another maybe five or six months. These extraordinary measures that they're going to use are things like no longer making investments in government pension funds. There's two or three huge government pension funds, federal employees' pension funds, the Postal Service pension funds.

They have a lot of contributions coming in, of course, just from people making their earnings. Instead of being reinvested straight away, Treasury will take that money, use it to pay for the rest of the government, and then they promise to make up the difference after the debt ceiling crisis is resolved. They're basically accounting dodges. The money movements, they can use for the next few months to keep Uncle Sam basically from maxing out.

Brian Lehrer: Two regular Americans wish we could invoke some magic, extraordinary measures for our own debts, but I guess we don't have that luxury. Let's talk more about these actual numbers. You just cited one of them, the current debt ceiling at $31.4 trillion. That's a lot of money. Plus, it's such a big number that people have no idea what it really means. Yellen says the ceiling has to be higher than that to pay everything the government owes. The government currently owes people more than $31 trillion?

John Cassidy: Well, it needs qualifying a bit. These things are always complicated. The $31.4 trillion figure refers to what's called a gross debt, all the debt that's issued by the federal government. Some of that is actually owned by other branches of the federal government like the Social Security trust fund. If you net that out, the figure is lower and is now about 100% of GDP equivalent. It is a very large number.

It's gone up a lot in recent years largely because of all the spending by both the Republican administration and the Democratic administration during the coronavirus pandemic when up to $7 trillion under the Trump administration has gone up by more than that, I think, under Biden. I have to double-check that. Don't cite me on that one, but it's gotten a lot in the last few years. It's a large number, but it's also pretty much in line with a lot of other developed nations now who are pretty much approaching 100% of their GDP.

Brian Lehrer: Who does the government owe that money to more specifically? I always hear China is a giant creditor.

John Cassidy: China is a big creditor, but the biggest creditor is other Americans, American pension funds. If you've got a 401(k), most likely, some of that is invested in US Treasury bonds. US Treasury bonds, despite these crises we go through every few years, still regard as the safest financial asset in the world.

Almost every pension fund in the country, every insurance company in the country will have some and quite a lot of its assets invested in US Treasury bonds. They're the biggest buyers, the university pension funds, all these big investing institutions. Then there are a lot of foreign buyers, foreign institutions, foreign investment funds, and foreign governments, including the Chinese, which are a big buyer, although they've actually cut down a bit in the last few years.

Brian Lehrer: I hear two different narratives, kind of competing narratives about our relationship to China because they owe a lot of US government debt. One is that China has a lot of power over us because it owes so much of our debt, own so much of our debt. If it decided to default, it could bankrupt the US government. That would cause disaster in this country, so we have to do more of what China wants us to do. The other narrative is we have China moreover a barrel because if the US ever were to default on its debts, well, China's dependent on that money continuing to come into it. China's got its own economic problems now, so is it one or the other?

John Cassidy: It's both of them up to a point. The Chinese debt, I think, is about $900 billion they owe us. Something thereabouts, which given that their whole debt is about $30 billion amount.

Brian Lehrer: Trillion.

John Cassidy: You're talking with maybe 3% of the debt. 3% or 4% is owned by the Chinese. If the Chinese were to sell--

Brian Lehrer: It's not as much as a lot of listeners probably thought, right?

John Cassidy: Not at all.

Brian Lehrer: When they say, "Oh, China owes so much of our debt," it's 3%, 4% you're saying of the debt?

John Cassidy: If the Chinese sold it all tomorrow, there'd be a big crash in US debt crisis for a day or two, but other people would step up. It's not as if we're wholly dependent on the Chinese to keep the government functioning. That's just not correct. As you say, on the other side of the equation, because it is a large sum of money, the Chinese would be hit badly by any default or any, which would-- If US debts go into default, their value on the markets will collapse. It's a two-sided thing. China is a big creditor of the US. As they say, it's, by no means, the biggest creditor as our domestic investors.

Brian Lehrer: Listeners, you have a rare opportunity here to ask a question about the debt ceiling or debt ceiling politics, which we haven't even gotten to yet, to someone who might actually legit know the answers rather than your bestie at the bar. It's John Cassidy from The New Yorker, who is also author of the books How Markets Fail: The Logic of Economic Calamities and Dot.Con: How America Lost Its Mind and Money in the Internet Era. 212-433-WNYC, 212-433-9692, or tweet a question @BrianLehrer.

I still don't want to go to the politics yet of Kevin McCarthy. We're going to play a Kevin McCarthy clip and Biden and all of that, staying on the numbers a little bit more. As I understand, the rough round numbers about the US budget, the government took in about $5 trillion in revenue in the last fiscal year and spent around $6.5 trillion. It borrowed another $1.5 trillion roughly over everything it took in in taxes. Is that okay? Republicans more say no. Democrats more say yes. Borrowing $1.5 trillion out of your $6.5 trillion budget, you said a minute ago, this is more or less on par with other developed nations, but is that okay or how do we even decide if that's okay?

John Cassidy: Well, it is obviously a very large question. I think the answer is if it was on an ongoing basis, a deficit of that size every year wouldn't be acceptable. Eventually, the financial markets would bulk it. They think that the reason interest rates have been very low, one of the reasons over the last few years until the Fed started raising them, is that investors do believe the US government will always repay its debts.

That's why people around the world like the Chinese and the Saudis and everybody else puts quite a lot of their money in the US. Now, the question is, at what point will investors start to rethink that faith in the US government? As I said, there are very large deficits, very large debt issuance in recent years. We've had an extraordinary last three years. We've never had a global pandemic on this scale. The economic policies that have been introduced, there've been two effects.

Number one, because the economy got knocked back in the pandemic. Tax revenues fell sharply. Number two, and this was the bigger factor, the federal government introduced, we all know, a round of stimuluses paying individuals, paying businesses, giving financial aid to local governments, all very necessary things. We forget how bad it was back in 2020, but it costs a heck of a lot of money.

The way that the federal government paid for it was by issuing debt. We do need to bring the deficit down gradually, I would say, over the next years, but it is heading in the right direction. It has been going down. Even though at very large figures, it has been heading in the right direction. The deficit this year will be considerably smaller than that according to trends.

Now, does it need to come down drastically in the next few months? No, the Republicans are just ginning up the crisis there if they say the US government is about to go bankrupt. Does it need to be brought down to more sustainable levels over the decades in order to maintain the US's great advantage that it hasn't been able to issue so much debt and have such powerful currency, the dollar? Then the answer to that is probably yes.

Brian Lehrer: Those numbers, $1.5 trillion of borrowing on a $6.5 trillion federal budget, that's like if your personal budget is $65,000 and you borrowed $15,000 to pay those bills.

John Cassidy: Exactly. If you had a financial crisis, you lost your job or whatever, and you couldn't pay your bills, you'd borrow. That's effectively what's happened in the last few years. Now, underlying that, there's been a very large-- The US hasn't balanced its books. Apart from joining the Clinton administration in 40 years ever since the Republicans started cutting taxes under Ronald Reagan and renewed in the tax base, there's been a structural budget deficit of 3% or 4% of GDP every year. Now, that's a second debate. Can that go on forever? People in the 1980s didn't think it could, but the US does seem to have the capacity to issue a lot more debt and investors' willingness to buy it than most people thought back in the '80s when I first started reporting on them.

Brian Lehrer: [chuckles] Yes, at least so far. By the way, you gave me an opportunity for a promo, mentioning the fact that the last time the annual federal budget was balanced was during the Clinton administration. Did you know, John, that this Friday is the 30th anniversary of the inauguration of Bill Clinton as president? We're going to do a short series starting this Friday and running through next Friday on the Clinton and Giuliani years in America and New York because Clinton became president 30 years ago.

Giuliani was elected mayor 30 years ago. At least in the short term, things went really well, rebalanced the federal budget, crime went down under this Democratic president and Republican mayor. We're going to examine all of that. What was Republican about it? What was Democratic about it? What was fool's gold about it in various ways and how it's set up today?

Listeners, there's the promo that John gave me the excuse for our series starting this Friday and running through next Friday on how Clinton and Giuliani really how 1993, 30 years ago, gave us the world of today, beginning Friday on the 30th anniversary of inauguration of Bill Clinton. Getting back to the federal debt and this analogy that I just threw out as people do of a family budget, does the analogy of a family budget make sense when deciding what's okay for the government, or are people trying to trick us when they use that analogy at all?

John Cassidy: I think there is an element of trickery involved. You shouldn't compare the federal government to an individual household. For one thing, it's made up of more than 100 million households. There's no household I know that has the capacity to just issue bonds on the open market and investors from around the world will flock and buy them. It's a completely different thing. Debt in itself is not a bad thing.

You don't think it's bad if you go into debt to buy a house or an apartment. Virtually everybody does that. Getting a mortgage helps you to do that and improves your life substantially. Similarly, the government needs to issue debt for things like making long-term investments in things and investing in people through things like the healthcare service, Medicare, social security, et cetera. To some extent, they're all financed by debt. Debt is a good thing up to a point. The question is, when do you reach that point?

Brian Lehrer: Janet in Brooklyn, you're on WNYC with John Cassidy, who covers the intersection of economics and politics for The New Yorker. Hi, Janet.

Janet: Good morning. I think the money was borrowed in order to help us through COVID. It wasn't like I went into debt and used my credit to buy a flat-screen TV. I also feel that people--

Brian Lehrer: Well, some of it. Some of it, right? Some of it was borrowed to get us through this emergency. Go back 10 years, they'd say, "Oh, well, we borrowed a lot of money at the beginning of the financial crisis to get America through that Great Recession without more calamity." Then you can say, "Oh, after 9/11, we had to borrow a lot of money to get the country through--" You know what I mean? People have their things that keep happening.

Janet: Yes, it does happen. It helps me now because if the money maybe is not borrowed, then I'm going to be homeless today and my children may not have a future. I feel, I trust, I hope that the government is borrowing it so that they prevent a calamity today so that we can have a future tomorrow.

Brian Lehrer: Janet, thank you so much. Janet raises an essential tension here, borrowing so we can have a decent present today versus whatever risks to our children because that's what the deficit hawks always say, right? We're placing this burden on our children, whether that's true or not as some global threat. John?

John Cassidy: Yes, there's always two-sided obviously. As I said, she's right that a lot of it-- I'm just looking while we were talking. The federal debt back in 2016 was $19 trillion and it's gone up to, as you said, 30-point something since then. Nearly half of it has been brought on in the last six years. That is a combination of basically Republican tax cuts under Trump's famous package, then COVID, and then Biden's big spending bills as well. There've been a lot of factors, but COVID, I think, has been the largest in the last few years undoubtedly.

Brian Lehrer: The one that I left out for my list of big things that caused the country to borrow more was what you just mentioned, the Trump tax cuts. We borrowed money to give Americans tax cuts today.

John Cassidy: Correct, one of the really many annoying things. One of the annoying things about the whole debt limit, deficit discussion is the Republicans are very clever focusing all the attention on the spending side of the equation, but it's an equation. What's on the other side? The other side is tax revenues. I would say the biggest reason that we've had a deficit and a debt problem for the last 30 years is that Republicans have basically taken a political decision to undermine the tax base at any opportunity they can.

You could say it's a one-off, but it's not a one-off because we've been through it every time. They've been in power now for the last 25 years. Also, even when they're in power, even though they talk a good game about reducing spending, they don't actually do it much because most spending programs as we all know are very popular. We'll get onto that. That's going to become an issue this year. You've got to look at tax and spending when you're looking at the deficit. To just focus on spending is completely misleading.

The US is a huge economy. Our tax burden, even though it's gone up, is still considerably smaller than most countries in Europe and most other advanced countries. US has always had a relatively small federal government. Now, it also has a large local government, so you've got to have that to its states and cities, et cetera. Even if you do that, the taxes and spending as a percentage of GDP are still smaller in the United States than they are in most of the big European governments like the UK, Germany, or France.

Brian Lehrer: If you're just joining us, Treasury Secretary Janet Yellen says, "Tomorrow, the United States government will hit its debt ceiling." We've been talking about the economics of that with John Cassidy from The New Yorker. We're going to talk about the politics of it when we continue right after this.

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Kevin McCarthy: If we go back to '22 levels, that was what we were spending just two, three weeks ago. That's not cutting defense by $75 billion. Does defense getting more than $800 billion, are there areas that I think they could be more efficient in? Yes. Eliminate all the money spent on wokeism. Eliminate all the money that they're trying to find different fuels and they're worried about the environment to go through.

Brian Lehrer: Recognize the voice yet? That's the new Speaker of the House, Kevin McCarthy, speaking the other day about why they can take $85 billion out of the defense budget. You haven't probably heard the words "defense budget" and "wokeism" spoken in the same sentence a lot, but there it was. They can save money on the Pentagon budget by not worrying about climate change so much. That was in that clip. There we go.

To-be Speaker of the House Kevin McCarthy, to get the votes, made some kinds of promises to his right flank about ways that Congress would use this debt ceiling deadline tomorrow as leverage for something between now and actually June when the government would really run out of money to pay its debts. Let's turn to the politics of hitting the country's debt limit tomorrow, according to Janet Yellen. Now, as we continue with John Cassidy, New Yorker magazine staff writer and author of the books How Markets Fail: The Logic of Economic Calamities and Dot.Con: How America Lost Its Mind and Money in the Internet Era. Is it clear to you, John, what McCarthy has promised to do with respect to the debt ceiling?

John Cassidy: It's not entirely clear. As you said, we do know he's made some sort of deal with the Freedom Caucus ultras on the right. That's how he finally got elected on the 15th ballot after all that incredible theater we saw at the start of last week. There's been no published version of what he agreed to, but we do know that, certainly, one element of it was that he agreed he wouldn't raise the debt ceiling or he wouldn't put a bill on the floor to raise the debt ceiling unless there are substantial cuts in spending.

The right-wingers have now told The Washington Post that there was also another agreement that in the next month or two, they'll pass a bill to prepare for a possible debt ceiling breach in which they'll direct the Treasury Department to keep on paying some of its bills while it doesn't keep on paying its others.

The idea is that they'd keep paying interest on the national debt to avert a financial collapse while cutting off other big parts of the government. That doesn't sound very practical, but lots of other Republicans think that would be crazy as well. Anyway, there's some sort of a deal there. We'll see what it comes to in the next month or two as the Freedom Caucus presses McCarthy to keep the promises he's made.

Brian Lehrer: PJ in Manhattan, you're on WNYC with John Cassidy. Hi, PJ.

PJ: Good morning, Brian. Mr. Cassidy, I have a question for you on why people invest in Treasury bonds. Too recently, the return are 0%. The only people that are profiting are bankers because like Goldman Sachs, for example, they became a bank. Suddenly, they can borrow at 0% from the Fed and then landed at 5%, but the average investor virtually have no return on Treasury bonds.

Brian Lehrer: That's a really interesting question and it's not exactly true anymore. With rising interest rates, you can get a few percent on Treasury bonds. There's also a category called-- John, do you know this, H bonds? I'm not sure if it's H, where you can invest up to $10,000 and get almost 10% interest. Don't tell anybody because everybody will do it.

John Cassidy: Everybody should do it if you've got $10,000.

Brian Lehrer: Oh, I bonds. Right, I bonds.

John Cassidy: Inflation bonds, they are. They're a form of Treasury bond, but the return is linked to inflation. As the caller said, till very recently, the yields on Treasury bonds have been very low, but these are linked to inflation. For last year, I think they were paying 9% as you said. There's a limit of $15,000. They're intended for individual investors and individual savers.

If you've got $15,000 kicking around, you should definitely do that. In terms of why people buy Treasuries, an element of mystery there. For large investors, they always like to have some element of their portfolio in what they consider safe and liquid securities. In case there's a crisis, they won't lose a lot of value. If they ever need to cash in quickly, they can be guaranteed of getting a good price.

Treasuries fulfill that function for a large part of the world, it turns out, and that's where most of the demand for Treasury bond comes. If you're an individual investor and you don't think the world's going to end in the next couple of years or if there's going to be a huge financial crisis, until recently, Treasury bonds have been a zero-yielding return or close to zero.

Brian Lehrer: One of my colleagues who is probably pretty invested in I bonds, he seems to know all of this off the top of their heads. It was nine-point-something percent most of last year. Now, it's down to 6.3% interest on those Treasury I bonds. That's still really good compared to other safe investments. I guess because that payout has come down a bit and you can invest up to-- I thought it was $10,000. You said $15,000, so it's somewhere in there. Mike in Madison, New Jersey, you're on WNYC. Hi, Mike.

Mike: Hi there. Do we live in a cartoon universe where the roadrunner runs off the edge of the cliff and doesn't fall but the coyote does. I'm the coyote. If I don't pay my debts, I fall. How do we ever get out of this? Is it really just the case that the United States will never pay down any of its debt? It will always just cover it by making more?

Brian Lehrer: We're talking about wokeism in the Pentagon. We're talking about Road Runner and Wile E. Coyote cartoons in relation to the federal debt. We are going off the rails here, but you get his analogy, John, right?

John Cassidy: No, it is a good question. Can the US run large budget deficit indefinitely? As I said, when I first started covering this stuff back in the '80s, the consensus of opinion was that it couldn't. Some very learned economists wrote books at the time predicting a debt crisis pretty soon. I remember joining the '99-- I'm pretty old as you can guess, the '88 campaign. I'm talking about the election of Bill Clinton earlier. I covered that campaign and went to a conference in Washington during it.

At the time, a very eminent economist from the Brookings Institution made a presentation about how things were going to hell after the Reagan years and the US government was about to enter a total fiscal collapse. Now, Clinton administration, if you remember, took that very seriously, raised taxes, trimmed spending, and actually brought the US back into fiscal balance. That's what we'll be talking about in your show next week, I'm sure.

Since then when Bush took over in 2000, ever since then, the deficit and the-- Well, for eight years Republican, it was back on an upward trend. The Obama administration, as you'll remember, after the last debt ceiling crisis, it was resolved with a sequester, which did actually restrain spending for a few years. Then Republicans came back in. What did they do? They introduced another huge tax cut. Then we have COVID and the deficit explodes. Can it go on forever? No. Can it go on for a lot longer than people think? Yes. That's what we've learned in the last 40 years.

Brian Lehrer: I read that to show how willing they are to go to the mat on this, Kevin McCarthy agreed to prioritize which debts the government would pay first or default on first if the Democrats don't compromise enough on spending. Do you know at all what's at the top or the bottom of that list like who's going to get paid and who's going to get stiffed as leverage if they use it?

John Cassidy: Well, two things to say here. This is going to be a bill. This is what I was mentioning earlier. The bill looks like the Republicans will pass it in Congress, in the House. It's got zero chance of becoming a law with the Democrats controlling the White House and the Senate. It's basically just another bargaining chip. What would it do? Again, it's all very vague at the moment.

All the Republican plans are very vague because if you start to spell them out, they'll become very unpopular. What they're saying is that, basically, if we do breach the debt limit, they can't reach an agreement in June. I'm sure the Treasury could drag it out a bit longer if they needed to. After all that, all the theater, everything, the Republicans still refuse an agreement and it can be passed, then we breach the debt limit. The government legally then wouldn't be allowed to issue any more bonds.

All it could spend was the taxes that are coming in on a daily basis. That, according to an economist I spoke to yesterday, would lead to a huge cut in spending immediately. What would be left? They're saying that they would still pay the interest on the national debt. The Republicans are saying that because, obviously, they are going to argue, "Well, we don't have to default. We'll keep paying the Chinese. We'll keep paying the pension funds. We'll keep paying the university endowments, et cetera."

The financial markets won't collapse. We'll just cut other things. Well, what will you cut? Here, again, they're very vague. They seem to be saying, "Well, we won't cut the military," although some Republicans say they will. "We won't cut Social Security. We won't cut Medicare. We won't cut veterans' benefits," and various other things they know are very, very popular. If you don't cut anything, you don't cut. There's going to be huge cuts somewhere in that eventuality.

There was a very good piece about this in The Washington Post, which interviewed even some Republican economies who had looked at this option back in 2011. They looked at it closely and they thought, A, it would be unworkable because it's very difficult to divide up the money like this. B, it would be a political disaster for the party. I think even if some of the House crazies wanting to go down this road, they'd be pushed back from the more moderate wing of the Republican Party. That's one of the most fascinating things about this. Are the Republicans going to be able to hold together? What is going to be their strategy?

Brian Lehrer: By the way, on those relatively high-interest I bonds, tax accountant tells me you can invest $10,000 in I bonds out of pocket plus up to another $5,000 from your tax refund if you get a tax refund. That's why some say $10,000, some say $15,000. I think that straightens it out. Listener asks on Twitter, "Is Social Security really in trouble or can it be corrected by making small adjustments to the tax rates?" We have a lot of questions like this coming in actually because Social Security always comes up. You just brought it up in the context of these debt ceiling conversations.

John Cassidy: Yes, Social Security in the larger context, a bit of a red herring. I've been writing about this for longer than I care to remember. It needs to be propped up. In the scheme of things, it's actually a pretty minor adjustment. You need a pretty minor increase in taxes to make the Social Security solvent for the next few decades. Medicare is a much bigger issue in which we've been kicking the canon for decades as well. Social security, I think, it's always brought up because it's obviously a hugely salient, political topic. In economic terms, it's not the big challenge and it's not about to go bankrupt.

Brian Lehrer: Last question. President Biden says no negotiations on the debt ceiling. This is the politics from his side. Is that what Democratic presidents usually say, given how long you've covered this, or are negotiations around the debt ceiling normal and that's what we can expect over the next few months?

John Cassidy: Well, ultimately, unless one party controls Congress, there has to be some sort of negotiation because you need the votes of the other party to pass the legislation to raise the debt limit. In 2021, the last time this was done, the Democrats control both Houses that are able to get it through. Now, it's still a bit sketchy because, unless you do it through reconciliation, which is a very long process, you need 60 votes in the Senate.

They had to get approval from McConnell, which they did at that stage. They had the thread in reserve that they could have done it through reconciliation if the Republicans didn't go along. If you're in that stage, in that thing, it goes through relatively easily. The Republicans were in charge. They always raised the debt limit and don't bring it up until the Democrats come back the next time.

Now, the big historical example, which everybody's talking about now, is 2011 and 2013 when they were negotiated. The Obama administration, you'll remember, after the Tea Party victories in the 2010 midterms, the Tea Party was making noises very similar to what the Freedom Caucus is making now. Spending’s out of control. We have to do something, can't raise the debt limit.

The Obama administration coming out of the Great Recession was very understandably worried about the economy. They thought this could be a disaster. If it gets out of control, we're under the financial crash, et cetera. They agreed to negotiate. A lot of Democrats think it didn't go very well from the Democratic point of view because they had to end up agreeing a sequester. The sequester policy, which, if you remember, was the draconian threat to slash spending across the government if other spending cuts agreed.

Spending was restrained from 2011, 2016. If you talk to Democrats in Washington on the political side, a lot of them think that really damaged Democratic political prospects because it held the economy back during those years. Some of them even think it may have been probably responsible for Trump's rise because one of Trump's big arguments if you remember was that the economy was growing very slowly under Obama.

Brian Lehrer: Really good historical context, John. I guess saying no negotiations is often your first negotiating position. [laughs] Maybe that's what we heard from Biden the other day. John Cassidy, New Yorker magazine staff writer since 1995, who is also the author of the books How Markets Fail: The Logic of Economic Calamities and Dot.Con: How America Lost Its Mind and Money in the Internet Era. Thanks for making us a lot smarter on the debt ceiling. Now, we can all go to a lot of cocktail parties and hangouts and say to our friends, "Hey, you want to know about the debt ceiling?" Then they'll throw us out. John, thank you very much.

John Cassidy: Thanks very much. I enjoyed it, Brian.

Brian Lehrer: Brian Lehrer on WNYC. Much more to come.

 

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