Keith Hennessey on the Debt Ceiling and the Budget Process

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🗓️ 25 July 2011

⏱️ 71 minutes

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Summary

Keith Hennessey of Stanford University's Hoover Institution talks with EconTalk host Russ Roberts about the debt ceiling and the budget process. Hennessey, who worked for Senate Majority Leader Trent Lott on budget issues in the late 1990s, explains the politics of the debt ceiling and the budget process. Using his past experience as a staffer, Hennessey gives those of us on the outside a window into what is actually going on in the hallways, who has power, and how information flows up and down in the chain of constituents, members, party leaders. The conversation closes with Hennessey's best guess of which outcomes of the current negotiations are most likely and why.

Transcript

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0:00.0	Welcome to Econ Talk, part of the Library of Economics and Liberty. I'm your host Russ Roberts
0:13.9	of George Mason University and Stanford University's Hoover Institution. Our website is econtalk.org
0:21.2	where you can subscribe, find other episodes, comment on this podcast, and find links to
0:26.5	other information related to today's conversation. Our email address is mailadicontalk.org. We'd
0:33.6	love to hear from you. Today is July 20th, 2011, and my guest is Keith Hennessy at Research
0:42.9	Fellow at Stanford University's Hoover Institution. Keith, welcome to Econ Talk. Thanks. Keith, you're
0:48.8	an economic advisor, President Bush, as well as a staffer for Trent Lot. I think when he was a
0:53.8	majority leader, is that right? That's right. So I've come to you for wisdom about a very
0:59.6	complicated and dry subject that is in the news. Certainly this week, it may be beyond which is
1:07.4	the budget and the current discussion of the debt ceiling, which for me is a somewhat
1:12.4	mystifying subject, and I think for a lot of people. So I'm hoping to ask you a lot of stupid
1:18.8	questions, and I hope you give me smart answers. I can't promise you wisdom, but I promise
1:24.2	to explain things as I understand them. That's great. So the day that people are talking
1:31.4	about as an important day is August 2nd. On August 2nd, evidently, if the debt ceiling,
1:40.1	which is currently at a mere 14.29 trillion dollars, if that is not lifted, that debt ceiling
1:48.1	is not raised, my understanding is we're going to the U.S. government will not have enough
1:55.2	money to meet its obligations. Is that correct statement? Is that why August 2nd is important?
1:59.7	That's why August 2nd is important, based on information provided by the Treasury Department.
2:06.1	So there are a few things to understand about that. The first thing is that what that means
2:11.7	is that Treasury and OMB, the Office of Management and Budget, they have their cash and debt
2:17.0	management plans, and it means that Treasury does not think that they will have sufficient
2:22.4	cash both to pay interest and principal on debt obligations and to make all of the other
	...

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