'This Week' Roundtable: Economic Outlook


an op-ed in the Washington Post, where I said if we didn't get these

deficits under control, I thought it would precipitate the next

financial crisis. I also agree with the administration, though, that

it's irresponsible even to entertain the idea of even a so-called

technical default on the public debt.

So I think both sides have a point, and I hope they come together.

And gentlemen, if you excuse me, I think maybe there's a little too much

testosterone in this debate. It's too much about winning and losing and

not enough of both sides are right, let's come together and have a


AMANPOUR: What would a default mean? What impact would it have?

ALTMAN: When I hear all this discussion about not voting to raise

the debt limit, absolutely not and so forth, as we just heard earlier on

the show, I have to roll my eyes a bit. Because, as Doug said, the debt

is a product of past budget decisions. And we have no alternative,

therefore, but to raise the debt limit. For example, we're running a

deficit this year between 1.4 and 1.5 trillion. Those amounts have to

be borrowed, just like a household which is spending more than it takes

in. It has to raise cash. So there is no alternative but to allow the

United States to continue to borrow. Therefore the debt limit has to be

raised. And should we somehow fail to do that and there be a default, I

agree with what the Fed chairman, Chairman Bernanke, said this past

this, which is that it would have severely destabilizing impacts.

In fact, he said it would probably bring back the severe chaos we

saw in the immediate aftermath of the collapse of Lehman Brothers in the

fall of '08.

KRUGMAN: If I can just weight in, that this is -- U.S. debt -- it's

not just that our credibility is on the line, that people could get

spooked by the fact that we start to look like a Banana Republic.

But it's also that U.S. debt plays a very special role in the world

system, right?

A U.S. treasury bill is the gold standard of value, so much so that,

during the height of the financial crisis, there were intervals where

U.S. Treasury bills had negative interest rates, because that's what

people had to hold.

And if you're going to suddenly say, oh, that's not safe because the

U.S. government is -- is a bunch of squabbling children, that is a real

possible catastrophe.

AMANPOUR: And even the -- the Chamber of Commerce leader is saying

that it's time to make this deal, raise the debt, and not even talk

about cuts right now.

KRUGMAN: That's right, because the cuts issue -- I'm sorry -- but

it's a huge thing, not to be settled in a few weeks of frantic yelling.

HOLTZ-EAKIN: So the U.S. is very unique in that it has a debt

limit. So imagine we didn't have one. We'd have an enormous problem.

We're on track to literally create a new financial crisis, given the


So dealing with the problem has to be the top priority. The

prospect of that financial crisis is anti-growth. It hurts the most

important job, which is jobs. And so I think the important thing is for

the Democrats who ultimately control this town and need to provide the

leadership on this to recognize that dealing with the problem, not the

debt limit symptom, is the key. And that's the route to real success.

ALTMAN: But you just made an important point, which is that the

business community and the financial community, which are largely

Republican, are entirely united in urging all of Washington, but

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