Watch Fareed’s interview with Wolf and Minton Beddoes on GPS this Sunday on CNN at 10 a.m. and 1 p.m. ET
GPS Digital Producer Jason Miks sits down with Zanny Minton Beddoes, economics editor of The Economist, and the Financial Times chief economics commentator, Martin Wolf, to discuss the recent government shutdown, politics in Washington, and why the debt ceiling is “absurd.”
Congress managed to agree to a last minute deal over the debt ceiling and government shutdown. But how would a debt default have affected average Americans, or how could it if this comes up again in the future?
Minton Beddoes: October 17 was the day on which the Treasury Department said it was going to run out of capacity to juggle its finances such that it could continue borrowing. And that means that from October 17 it would have had no more borrowing authority, and it essentially would have had to go to a cash budget overnight. It could then only spend what tax revenue was coming in, which is the equivalent of about 65 percent of spending. That means the government would not have been able to pay all its bills. Something would have had to give: that could mean stop paying interest on the debt, or stop sending social security checks out, or stop paying other obligations, whether to soldiers or suppliers.
There was one practical question and a lot of legal ones. The practical one was whether the Treasury, which pays millions of people every day, would find it practical to prioritize certain payments – could they actually do that, legally and practically.
And secondly, if they could, what would they prioritize? The rest of the world was worried most that they would fail to pay the interest on their bonds, so that would be a technical default. If they were unable to send out social security checks, it would be equally breaking the law, because it would be breaking a promise that they had made. But that would have a very different impact – it might not have paralyzed global financial markets, but it would have had a very big political impact as millions and millions of senior citizens didn’t get their social security checks.
CNN speaks with Fareed about the shutdown in Washington and why the Republican Party is struggling to maintain unity.
You wrote in the Washington Post this week: “Over the past six decades, conservatism's language of decay, despair and decline have created a powerful group of Americans who believe fervently in this dark narrative and are determined to stop the country from plunging into imminent oblivion."
"At some point, will they come to recognize that you cannot love America in theory and hate it in fact." You also want conservatives to lighten up, Fareed. Explain what's going on here.
Well, I think there are two things going on. One is the kind of institutional collapse of authority in the Republican Party so that as you know, on immigration, the leadership of the party wanted to make a deal. Most senators, most of the leaders in the House, but they can't because there's no structure. This is not Newt Gingrich's Republican Party anymore.
The second piece is that there is this extreme wing within the party, the Tea Party, which really believes that America is going to hell in a hand basket – and tomorrow. You know, as Ted Cruz said at the Values Voter Summit, we've got two years to stop this country from plunging into oblivion. Well, if you use rhetoric like that, if you work people up like that, it's very tough to see how you could compromise.
"Fareed Zakaria GPS," Sundays at 10 a.m. and 1 p.m. ET on CNN
By Fareed Zakaria
The current Republican fear derives from Obamacare, but that is only the most recent cause for alarm. Modern American conservatism was founded on a diet of despair. In 1955, William F. Buckley Jr. began the movement with a famous first editorial in National Review declaring that the magazine “stands athwart history, yelling Stop.” John Boehner tries to tie into this tradition of opposition when he says in exasperation, “The federal government has spent more than what it has brought in in 55 of the last 60 years!”
But what has been the result over these past 60 years? The United States has grown mightily, destroyed the Soviet Union, spread capitalism across the globe and lifted its citizens to astonishingly high standards of living and income. Over the past 60 years, America has built highways and universities, funded science and space research, and — along the way — ushered in the rise of the most productive and powerful private sector the world has ever known.
For some tacticians and consultants, extreme rhetoric is just a way to keep the troops fired up. But rhetoric gives meaning and shape to a political movement. Over the past six decades, conservatism’s language of decay, despair and decline have created a powerful group of Americans who believe fervently in this dark narrative and are determined to stop the country from plunging into imminent oblivion. They aren’t going to give up just yet.
The era of crises could end, but only when this group of conservatives makes its peace with today’s America. They are misty-eyed in their devotion to a distant republic of myth and memory yet passionate in their dislike of the messy, multiracial, quasi-capitalist democracy that has been around for half a century — a fifth of our country’s history. At some point, will they come to recognize that you cannot love America in theory and hate it in fact?
By Jim Manley, Special to CNN
Editor’s note: Jim Manley is senior director at QGA Public Affairs in Washington, DC. He was previously a senior staff member in the offices of Senators Harry Reid and Ted Kennedy. The views expressed are his own.
It was shortly after midnight last night, as I was checking the Blackberry one last time before going off to sleep, that I saw a remarkable story pop up courtesy of my friends at Roll Call. It said that – with just a couple of days to go before we reach the October 17 deadline to extend the debt limit – Senator Ted Cruz was spotted at a place on the Hill called Tortilla Coast. According to Roll Call, he was with, among others, Congressmen Louie Gohmert and Steve King. In other words, three quarters of what I call the Four Horseman of the House Apocalypse.
A couple of things struck me.
First of all, no self-respecting Texan (even one born in Canada, as the junior senator was) should be caught eating the Tex-Mex at this place. But, more importantly, the very idea that these guys (and perhaps 15 or so house members) would be “stratgerizering” at this late stage in the game should give everyone reason to pause.
CNN speaks with Fareed about the ongoing stalemate in Washington, the impact on America’s standing abroad and why investors are worried about the United States.
Is there something wrong with our system that this is happening again, three years of this budget stalemating?
It's a good question, because, let's be honest – the American system is designed to allow for easy gridlock. The Founding Fathers created a system fearing English tyranny, fearing an English king, so there are lots of different ways to veto stuff. There are lots of checks and balances. So, I think that's part of the issue. But really, what's at work here is something much more dangerous, which is here we're getting into an anti-democratic process, which is not the way the system was meant to work.
Look, if you want to repeal Obamacare and you're the Republican Party, you're the Tea Party, great. Go for it. If you want to get rid of entitlements, you want to cut government spending, that's great. There is a procedure. You pass a bill in the House, it passes in the Senate and the president signs it.
What's happening here is because the Tea Party does not have that ability, does not have a majority in the House or the Senate, and certainly the president wouldn't sign it. So what it's trying to do is really extortion, which is to say, we will block everything if you don't give us this, which we know we couldn't get passed through the democratic process, normally. That seems to me something quite new.
Watch "Fareed Zakaria GPS," Sundays at 10 a.m. and 1 p.m. ET on CNN
On GPS this Sunday: Why is Washington so polarized? And what can be done about it? Fareed speaks with three experts: American Enterprise Institute scholar Norman Ornstein, CNN legal analyst Jeffrey Toobin, and Vanessa Williamson, co-author of The Tea Party and the Remaking of Republican Conservatism.
Also, Goldman Sachs CEO Lloyd Blankfein discusses the economy, globalization, and inequality in America.
And in our What in the World segment: Advantage China, as U.S. President Obama misses two big summits in Asia as the stalemate in Washington continued. Could China teach the U.S. a thing or two about dealing with problems responsibly?
By Daniel Gaynor, Special to CNN
Editor’s note: Daniel Gaynor is a writer based in Washington, D.C., and a partner at Sweat to Solutions, a non-profit consultancy. The views expressed are his own.
As the government shutdown has entered its second week, there are few signs that the gridlock will be resolved anytime soon. But while finger pointing continues and federal employees stay furloughed, the larger crisis remains unresolved: gerrymandering.
However you vote on election day, you would probably like to know that your vote at least counts. But for more Americans than ever, that’s less and less likely to be the case. Since the last shutdown, in 1995, states from North Carolina to Arizona have been carved up into biased voting districts, in a process called “gerrymandering.”
So what is it? Let’s jump back to 1812. The governor of Massachusetts, Elbridge Gerry, signed into law a “redistricting” plan, one that carved his political opponents into voting districts where they would have less ability to win. And on a map, the new districts looked like a salamander. A local newspaper combined the words Gerry and salamander, and today we have “gerrymander.”
By Fareed Zakaria
Watch "Fareed Zakaria GPS," Sundays at 10 a.m. and 1 p.m. ET on CNN
It is the defining moment of a democracy – when an outgoing leader celebrates the election of a new one, from the opposing party. Think of George H.W. Bush welcoming Bill Clinton, or Jimmy Carter doing the same for Ronald Reagan. Across the world, this is the acid test of a genuine democracy. Mexicans will tell you that they knew that had gotten there when their President, Ernesto Zedillo, after seven decades of one-party rule, allowed free elections and stood with the newly elected successor and affirmed his legitimacy.
The basic and powerful idea behind this ritual is that in a democracy, the process is more important than the outcome. If a genuine democratic process has been followed, we have to accept the results, regardless of how much we dislike them. The ultimate example of this in recent American history might be Al Gore's elegant acceptance of the process – complicated, politicized, but utterly constitutional – that put George W Bush in the White House. It must also have been very difficult for Richard Nixon to report the results of the 1960 election – which John F Kennedy won by a razor thin margin and was marred by voter fraud – but he did. However much you dislike the outcome, you respect the democratic process.
By Jason Miks
As the U.S. government shutdown enters its second week, it is not just Americans wondering when the stalemate will be over – around the world, politicians and commentators have been weighing in with their take on how the U.S. got here, what happens next, and whether their own countries should be worried. GPS Digital Producer Jason Miks selects some of the highlights.
U.S. has been living far beyond its tax base
“For a generation or so, the American government has been living far beyond its tax base, with deficits since 1970 in all but four years. In 2010, it spent $1,900 billion more than it collected in tax – borrowing more than the entire GDP of Canada or India just to pay the bills. If the federal deficit has come down since then, total public debt is now well over 100 per cent of GDP, compared to less than 60 percent in the early noughties,” writes British Member of Parliament Douglas Carswell in The Telegraph.
“…Is it manageable? Perhaps. Maybe. Just about. Now imagine that interest rates return even half way towards their post-war historic average? Wipe out. The barely manageable will become completely unmanageable. Something is going to give. And I don’t mean in a philanthropic sort of way.”
China: We’re concerned
“China, the U.S. government's largest creditor, is ‘naturally concerned about developments in the U.S. fiscal cliff,” Vice Finance Minister Zhu Guangyao said in the Chinese government's first public response to the October 17 deadline in the United States for raising the debt ceiling,” Reuters reports.
“‘The United States is totally clear about China's concerns about the fiscal cliff,’ Zhu told reporters in Beijing, adding that Washington and Beijing had been in touch over the issue. ‘We ask that the United States earnestly takes steps to resolve in a timely way before October 17 the political (issues) around the debt ceiling and prevent a U.S. debt default to ensure safety of Chinese investments in the United States and the global economic recovery…This is the United States’ responsibility.’
By Allison Stanger, Special to CNN
Editor’s note: Allison Stanger is the Leng Professor of International Politics and Economics at Middlebury College and author of the forthcoming ‘Life, Liberty, and the Pursuit of Leaks: The Story of Whistleblowing in America.’ The views expressed are her own.
The chorus of voices condemning the undemocratic tactics of the Republican minority who forced a government shutdown are right on target. The Affordable Care Act was voted on, the Supreme Court upheld it, and efforts to repeal it failed. As Fareed Zakaria noted today, refusing to allow the government to function until you get your way is not how a democracy is supposed to work.
But the current embarrassing spectacle is no new development – the Republican Party in the Obama years has previously taken a win-at-whatever costs approach in seeking to overturn laws they don’t like by refusing to implement them.
Exhibit A for this approach is the Republican response to Dodd-Frank. President Barack Obama signed the Dodd-Frank Wall Street Financial Reform and Consumer Protection Act into law on July 21, 2010. Its full title captures its intent: “An Act to promote the financial stability of the United States by improving accountability and transparency in the financial system, to end ‘too big to fail,’ to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes.”
By Fareed Zakaria
It is the defining moment of a democracy – an outgoing leader celebrates the election of a new one, from the opposing party. Think of George H.W. Bush welcoming Bill Clinton, or Jimmy Carter doing the same for Ronald Reagan. Across the world, this is the acid test of a real democracy. Mexicans will tell you that they knew that they had gotten there when President Ernesto Zedillo, after 70 years of one-party rule, allowed free elections and stood with his newly elected successor and affirmed his legitimacy.
The basic and powerful idea behind this ritual is that in a democracy, the process is more important than the outcome. If a genuine democratic process has been followed, we have to accept the results, regardless of how much we dislike the outcome. The ultimate example of this in recent American history might be Al Gore’s elegant acceptance of the process – complicated, politicized, but utterly constitutional – that put George W. Bush in the White House.
It must also have been difficult for Richard Nixon to grin and accept the results of the 1960 election – a poll marred by voter fraud that John F. Kennedy won by a narrow margin – but he did. And as vice president, he reported the results to the Senate, saying:
“This is the first time in 100 years that a candidate for the presidency announced the result of an election in which he was defeated and announced the victory of his opponent. I do not think we could have a more striking example of the stability of our constitutional system and of the proud tradition of the American people of developing, respecting and honoring institutions of self-government. In our campaigns, no matter how hard fought they may be, no matter how close the election may turn out to be, those who lose accept the verdict and support those who win.”
By Fareed Zakaria
The entire political system creates incentives for venality. Consider just one factor – and there are many – the role of money, which has expanded dramatically over the past four decades. Harvard's Lawrence Lessig has pointed out that Congressmen now spend three of every five workdays raising money. They also vote with extreme attention to their donors' interests. Lessig cites studies that demonstrate that donors get a big bang for their campaign bucks – sometimes with returns on their "investment" that would make a venture capital firm proud.
Now, taking money out of politics is a mammoth challenge. So perhaps the best one could hope for is to limit instead what Congress can sell. In other words, enact a thorough reform of the tax code, ridding it of the thousands of special exemptions, credits, and deductions, which are, of course, institutionalized, legalized corruption.
The most depressing aspect of This Town, by Mark Leibovich, is how utterly routine all the influence-peddling has become. In 1990 Ramsay MacMullen, the great Yale historian of Rome, published a book that took on the central question of his field: Why did the greatest empire in the history of the world collapse in the fifth century? The root cause, he explained, was political corruption, which had become systemic in the late Roman Empire. What was once immoral had become accepted as standard practice and what was once illegal was celebrated as the new normal. Many decades from now, a historian looking at where America lost its way could use This Town as a primary source.
Watch the video for the full take and read more in the Washington Post