With news today that the U.S. has hit its debt ceiling, I thought back on my GPS interview last month with two former Secretaries of the Treasury – Robert Rubin who served under President Bill Clinton and Paul O'Neill who served under President George W. Bush. Both former Treasury Secretaries agree that raising the debt ceiling is essential - and should be done separate from budget negotiations. They believe it's reckless to play politics with this issue.
Here's the transcript (beginning at 6:55 in the video above):
Fareed Zakaria: Let's take the next crisis that people are talking about - the debt ceiling. You had to deal with this when you were Secretary of Treasury. Do you think that it is irresponsible for Congress to try to attach any conditions to the debt ceiling?
Robert Rubin: I thought in 1995, when we managed the last really serious confrontation around the debt ceiling, and I feel it even more strongly today, which is the debt ceiling should never be part of the budget negotiations. It's an anachronism.
We have a very, very serious fiscal problem. Our fiscal position is unsustainable. It is deeply dangerous. We need to deal with it. We need to deal with it effectively, while at the same time promoting public investment for competitiveness.
But that should be a totally separate matter from the debt ceiling, and we should pass the debt ceiling without any conditions while, at the same time, engaging in a serious budget negotiations.
I think an impasse or serious threats with respect to default are highly irresponsible. I think they can do great damage to confidence in our political system and also potentially to our markets. And the idea of default itself seems to me should be absolutely unthinkable.
Fareed Zakaria: Paul, would you agree on the debt ceiling?
Paul O'Neill: Absolutely. You know, when I was Secretary, and we were heading into this kind of a crisis about raising the debt ceiling, I signaled people in the Congress that I was not going to do the tricks that Treasury Secretaries had been doing to give them a little bit more running room.
This is really kind of ridiculous. Right now, we've got $14.6 trillion worth of acknowledged debt. We actually have $75 trillion worth of unfunded liabilities. But, in order to get by the next election, say beyond November of 2012, they need to raise the debt ceiling by at least $2 trillion.