[PROMOS/MUSIC UP & UNDER]
BROOKE GLADSTONE: From WNYC in New York, this is On the Media. Bob Garfield is out this week. I’m Brooke Gladstone.
SENATE MINORITY LEADER CHUCK SCHUMER: I got a call early this morning. He said, this was so great.
BROOKE GLADSTONE: And that’s Senate Minority Leader Chuck Schumer, describing to The New York Times Donald Trump’s absolute elation at -- good press.
SENATE MAJORITY LEADER SCHUMER: [LAUGHS] And he -- here’s what he said. He said, do you watch Fox News? I said, not really. He said, they’re praising you, meaning me. But he said, and your stations, meaning, I guess, MSNBC, CNN, are praising me. This is great!
BROOKE GLADSTONE: This, following the President’s surprise deal last week with Democratic leaders on the debt ceiling, which actually wasn't so much of a deal as it was an agreement to kick the deal down the road for three months. And, while that may sound like a punt, for the political press it was a total game changer!
FEMALE CORRESPONDENT: When we come back, is Donald Trump declaring his independence or just going rogue?
FEMALE CORRESPONDENT: He is, in many ways, the first independent to hold the presidency since the advent of the current two-party system around the time of the Civil War.
MALE CORRESPONDENT: Trump is a former Democrat and so it's almost like his natural habitat is to deal with Democrats, but Republicans are just infuriated today.
BROOKE GLADSTONE: So thrilled was the President with the press attention, he scheduled a second date this week with Democratic leaders to discuss DACA and a pu pu platter of other issues over Chinese food. Here’s the view from FOX Business.
LISA KENNEDY MONTGOMERY: President Trump is dining with the devil and his vampire bride, as Chuck Schumer and Nancy Pelosi have agreed to break bread and suck blood with the President. President Trump had a taste of that sweet bipartisan nectar after making the short-term debt ceiling deal with Chuck and Nance. And now he’s addicted.
BROOKE GLADSTONE: But as eager as the talking heads have been to cover each new plot twist, they seem decidedly less engaged in explaining just what those deals might mean. Take, for instance, the debt ceiling. For years, the media have treated the perennial debt ceiling debate like hurricane season. Is disaster heading to our shores? When will calamity strike? What's the projected damage? Often lost in the coverage, why we have to keep reliving this crisis, in the first place.
Zachary Karabell is head of global strategies at Envestnet. He’s also author of The Leading Indicators: A Short History of the Numbers That Rule Our World. Welcome back to the show.
ZACHARY KARABELL: Thank you, Brooke.
BROOKE GLADSTONE: A quick explainer, if you please. Step one, Congress passes the budget, step two, it raises the debt ceiling to pay for it. But presumably, our legislators have already made the hard choices in step one, so why do we have a step two?
ZACHARY KARABELL: So the debt ceiling was created a hundred years ago. We’re like at the 100th anniversary of the Federal Reserve and the 100th anniversary of the debt ceiling. Until 1917, the United States didn’t tend to run budget deficits, so it was a rare thing, almost only in times of war that you took on debt. And because it was a rare thing, whenever Congress decided that the federal government needed to borrow money, it would just authorize a bond issuance. There was no budget that was over budget until 1917 and there weren’t a lot of budgets after 1917. The Great Depression and during World War II were exceptions.
BROOKE GLADSTONE: Mm-hmm. Now the government does borrow. There's a saying that the argument over the debt ceiling is basically legislative terrorism. It's been weaponized, by whom?
ZACHARY KARABELL: Well, it was first weaponized by the Republicans led by Newt Gingrich in 1995. So the first real hostage-taking situation like, change the budget or we’ll shut down the government was in 1995.
PRESIDENT BILL CLINTON: Speaker Gingrich said he and his new Republican congressional majority would force me, the congressional Democrats, and the American people to accept their budget and their contract by bringing about a crisis in the fall, shutting down the Government and pushing America in default.
ZACHARY KARABELL: There had been rumblings of it before but it has primarily in modern history, if “modern” means the last 20 years, been a tool used by Republicans to force a discussion of cutting government spending. The debt ceiling as a tactic of a party to disrupt another party can certainly be effective but when you are the governing party, i.e., the Republicans are now the governing party, the debt ceiling is a really inconvenient weapon for the minority voices within your own party to challenge you. So Paul Ryan’s all for debt ceiling, we are not gonna spend another dime and we’re not gonna borrow another dime ‘til we cut spending, all for that when it’s Republicans against Democrats. When it’s Republicans against Republicans, the leadership isn't so fond of it.
BROOKE GLADSTONE: And now it's being used principally by the tea party caucus. But why are the Democrats in such a rush?
ZACHARY KARABELL: So the goal for the Democrats was really to keep this issue going because it will distract from other issues and it will be embarrassing. It is a marker whose only utility is to create political complications. Part of it is because over the past years Congress has not passed a budget.
BROOKE GLADSTONE: We see budgets being passed where appropriations change.
ZACHARY KARABELL: Right but most of the budgets, certainly since 2008, have been continuing resolutions of the prior budget, with some tweaking. We saw after 2013 with this thing, sequestration, right?
BROOKE GLADSTONE: Mm-hmm. [AFFIRMATIVE]
ZACHARY KARABELL: Meaning we can’t agree what parts of the government we want to cut or augment spending on, so we’re just going to cut everything across the board by 10 percent. You have not really had a unified budget. Little pieces have been passed here and there, continual resolutions to other pieces, a total hodgepodge. So because Congress can’t agree on a budget, the debt ceiling authorization becomes the proxy for spending discipline that they can't embed in the budget process.
BROOKE GLADSTONE: So if we’re news consumers, what we hear, certainly from one side and sometimes from the other, is that spending is out of control.
HOUSE SPEAKER JOHN BOEHNER: Giving the federal government more money would be like giving a cocaine addict, all right, more cocaine.
ZACHARY KARABELL: So much of our aggregate debt is higher than it’s ever been. It just passed $20 trillion. But the actual amount that we’re paying to service that debt, which is the money that we spend annually, is lower than it was into the early 1980s, just because interest rates are so low. It’s like a mortgage. I mean, it doesn't matter that you have a million-dollar mortgage or a 500,000-dollar mortgage, it matters what your interest payments are on that mortgage. A 5 percent mortgage makes that really expensive and a 2 percent mortgage makes it a lot less so. The same thing with the federal debt.
You can argue about what cost would be unbearable, paying a percent and a half of your GDP on interest bearable and paying 3 percent not. Even if interest rates spiked, it’s not as if our costs are going to go up 10x.
BROOKE GLADSTONE: Okay, so give me a sense of perspective here. If --
ZACHARY KARABELL: Perspective in the media, are you kidding?
BROOKE GLADSTONE: [LAUGHS] Right now, what’s our interest rate on the debt?
ZACHARY KARABELL: It’s between 2 and 3 percent.
BROOKE GLADSTONE: What was it 10 years ago?
ZACHARY KARABELL: Four, 4-1/2, 5, before 2007. Interest rates peaked in 1982. More or less, with some variability, they’ve just been coming down over the past 35 years.
BROOKE GLADSTONE: Right now, our debt exceeds the gross domestic product, how much value we produce over the course of a year?
ZACHARY KARABELL: Yeah.
BROOKE GLADSTONE: Again, some more perspective. How does that compare to, say, the ‘80s or the ‘90s?
ZACHARY KARABELL: It’s been creeping up year by year. There was some deficit reduction, as you know, under Clinton, but overall our debt levels have been going up and up and up. Not all that debt is owed. You know, a lot of it's the government writing IOUs to itself. Some of it is kind of an accounting fiction, so we, we borrow money from ourselves to pay ourselves.
BROOKE GLADSTONE: And the size of the debt doesn’t matter?
ZACHARY KARABELL: At some point, it matters. I’m simply saying we are way, way away from that point.
BROOKE GLADSTONE: Mm-hmm.
ZACHARY KARABELL: And the tea party is saying, we’re way, way beyond that point.
BROOKE GLADSTONE: It doesn't seem as if the debt is the bogeyman that it was four, five years ago. Then the rhetoric around it, in what we were doing to our children, would just cause spontaneous combustion.
REP. PAUL RYAN: When we see our nation destroying our children's future by settling with a debt they can’t handle, we’ve got to do something about that.
PRESIDENT OBAMA: We can’t mortgage our children’s future on a mountain of debt.
ZACHARY KARABELL: During the time when the S&P downgraded the US debt in 2011, there were other debates, in 2011, ’12, ’13, where debt was on the top of the agenda, when people were surveyed as their main concern. That was very high, and I wrote pieces somewhat arguing we should look at the interest payments on the debt, we should look at the servicing, not the absolute level; debt can be a tool, if it's used wisely. And the amount of hate mail and anger that that generated in people! The joke at the time is I could write an article in favor of child pornography and I would have received less angry responses than I did suggesting that maybe the levels of absolute debt were not so critical to our future. I mean, I literally was called a “hater of America,” wanted to destroy the American future.
BROOKE GLADSTONE: And why not that kind of pushback now?
ZACHARY KARABELL: To some degree, it's just cyclical. So health care some years is a huge deal, other years it’s not. Terrorism, you know, rises or falls, climate change, same thing. Part of it is media cycle of no one story can gain traction for too long. I mean, the narrative does have to change, Even in the primaries with the Republicans, debt levels were not the issue.
BROOKE GLADSTONE: Ah, that’s true.
ZACHARY KARABELL: This really waned after 2014, you could say the Republicans gaining control of the house in such a commanding way. I also think the fact that the economy has stabilized, I mean, you can argue about how bad or good it is for many of us, but it's clearly stabilized over the past four or five years, which is an offsetting factor to the level of fear.
American attitudes towards debt have been emotional for a long time and, and maybe they’ll come to the fore again next year, as Trump ratchets up the rhetoric about our dependency on others, right? China holds our debt, Mexico is stealing our jobs. You know, whatever the, whatever the next wave of “us and them” is, debt can easily feed into that. So I wouldn't call it a day on this as being a source of hysteria. It’s just been in abeyance.
BROOKE GLADSTONE: When you’re watching the news, you know, annually during this time, what’s something that makes you want to tear out your hair?
ZACHARY KARABELL: Well, what hair there is.
The thing that aggravates me the most is we ought to be holding Congress much more accountable for not passing budgets. Dealing with the country's finances, deciding what to spend is one of the central functions of the legislative body. So in a weird way the debt ceiling prevents the hard work.
BROOKE GLADSTONE: So are you suggesting people just skip over the debt ceiling stories?
ZACHARY KARABELL: Yeah. [PAUSE]
There is no “there” there. But the minority who want to use it as a tool, like, this is the only way in which the Freedom Caucus, the current group of Republicans who were elected on a “government spending is out control, debt is going to destroy us, we have to change this or else we’re all gonna collapse in the face of the Chinese or the banks, or whomever else,” this is the major point of leverage that that group has. There’s already a fracture going on within the Republican Party. If you get rid of the debt ceiling right now, you really risk that fracture becoming outright civil war.
BROOKE GLADSTONE: But if you took politics out of it, it doesn't make any sense to have a debt ceiling.
ZACHARY KARABELL: Yeah, if you took politics out of it, a lot of this wouldn’t make sense.
It would be kind of the, you know, “Other than that, Mrs. Lincoln, how did you like the play?”
BROOKE GLADSTONE: So how’d you like the play? [LAUGHS] All right, Zachary, thank you very much.
ZACHARY KARABELL: Thank you.
BROOKE GLADSTONE: Zachary Karabell is the author of
The Leading Indicators: A Short History of the Numbers That Rule Our World.
Coming up, what do medieval history and Taylor Swift have in common? This is On the Media.