Transcript from Live Q&A on the Debt Ceiling

Transcript from Live Q&A on the Debt Ceiling

Transcript from Live Q&A on the Debt Ceiling

This transcript is from a live chat discussion between Mercatus scholars and members of the media regarding the debt ceiling.

 Debt Ceiling Q&A(02/24/2011) 
1:00
[Standby]  The host is placing this Live Event into Standby Mode.
1:44
Good afternoon. This is Catherine Behan from the Mercatus Center at George Mason University. I will be moderating this event. Our experts joining us and an idea of their thoughts are:

Veronique de Rugy, senior research fellow with the Spending and Budget Initiative at the Mercatus Center at George Mason University

“The federal government has other options than to default,” said de Rugy. “If the debt ceiling is not increased, the Treasury can make interest and debt payments its first priority to avoid default, essentially putting the government on a stringent pay-as-you-go basis.”

Matthew Mitchell, research fellow with the State and Local Policy Project at the Mercatus Center at George Mason University

“Default would dramatically increase the interest rates for buying federal government’s bond,” said Mitchell. “This would push up interest payments even higher, further exacerbating our spending problem.”

Garett Jones, member of the Mercatus Center’s Financial Markets Working Group and assistant professor of economics at George Mason University

“Republicans can’t realistically threaten to not raise the debt ceiling, because defaulting would mean we’d wouldn’t be able to borrow again at a low interest rate for services like national defense,” said Jones. “It’s a bluffing game.”

Antony Davies, Associate Professor of Economics at Duquesne University and member of the Spending and Budget Initiative at the Mercatus Center at George Mason University

“There are three things that legislators can ask for in exchange for raising the debt-ceiling: a spending limit on all future budgets, a repeal of the impoundment law requiring the President to spend money appropriated by Congress, and to control non-discretionary spending,” said Davies.

Bruce Yandle, Dean Emeritus of the Clemson College of Business and Behavioral Sciences and member of the Financial Markets Working Group at the Mercatus Center at George Mason University

“When Congress chooses to cease funding government operations, federal agencies, by law, cannot function,” Yandle said. “A complete shutdown would temporarily end such things as protection of the President and Congress, closing the FBI, ceasing protection of the food supply, and airport security, to name a few—they are extremely costly.”
Thursday February 24, 2011 1:44 
1:45
We are up early, but happy to store up some questions are we get things together
Thursday February 24, 2011 1:45 
2:01
[Comment From Guest Guest : ] 
Hi everyone I have a question: What will the implications of a shutdown be on the bond market (and therefore on borrowing costs)?
Thursday February 24, 2011 2:01 Guest
2:06
An answer is coming from Bruce Yandle, who is on the phone, not in the chat tool, and we're transcribing. I apologize for the delay.
Thursday February 24, 2011 2:06 
2:07
[Comment From Guest Guest : ] 
Will all federal employees be furloughed in the case of a shutdown?
Thursday February 24, 2011 2:07 Guest
2:09
[Comment From Bruce Yandle Bruce Yandle : ] 
If you look at the prices of credit default swaps as an indication of pending risk there is no meaningful evidence that the world credit market is indicating any nervousness about the possibility of default.
Thursday February 24, 2011 2:09 Bruce Yandle
2:10
[Comment From Matt Mitchell Matt Mitchell : ] 
Re. all employees being furloughed: no. the OMB requires agencies to have a contingency plan. Only non-essential employees will be furloughed.
Thursday February 24, 2011 2:10 Matt Mitchell
2:11
[Comment From Guest Guest : ] 
Why are Republicans going after federal workers and not cutting defense spending?
Thursday February 24, 2011 2:11 Guest
2:13
[Comment From Guest Guest : ] 
How would they expect the Defense Department to be treated in the event of a shutdown? Clearly, military folks in Iraq and Afghanistan would be exempted from furloughs, but how about civilian support staff handling clerical duties, etc.? Do they know how DOD was handled in the 1995-96 shutdowns?
Thursday February 24, 2011 2:13 Guest
2:16
[Comment From Matt Mitchell Matt Mitchell : ] 
Re. Reps and defense spending: If we want cuts to be meaningful, everything should be on the list, including defense spending. I can’t entirely speak to the political calculation that Republicans are making.
Thursday February 24, 2011 2:16 Matt Mitchell
2:16
[Comment From Veronique de Rugy Veronique de Rugy : ] 
I can't talk for Republicans' motives but to be fiscally responsible we need to put everything spending on the table, including defense spending
Thursday February 24, 2011 2:16 Veronique de Rugy
2:16
[Comment From Antony Davies Antony Davies : ] 
It's hard to talk about meaningful cuts unless we take nothing off the table. For example, the President recently spoke about cutting $300 million from community development block grants. That amount sounds large, but is truly irrelevant compared to the size of the deficit. In short, any cuts that don't include the word "trillion" aren't very meaningful.
Thursday February 24, 2011 2:16 Antony Davies
2:16
[Comment From Veronique de Rugy Veronique de Rugy : ] 
Re bond market: This question about the impact of the shutdown on bond market is the same we are getting about the impact of not raising the debt ceiling. Here is my take. Would the government’s change in policy to not raising the debt limit but instead cutting spending make the bond market nervous? Not raising the debt ceiling could change expectations about U.S. policy going forward, but the debt-limit debate has probably already caused investors to adjust their expectations about the United States’ long-term ability to pay back its debt.
Thursday February 24, 2011 2:16 Veronique de Rugy
2:17
[Comment From Veronique de Rugy Veronique de Rugy : ] 
Re bond market part 2: If government announces, however, that if and when the US debt reaches its ceiling, the government will prioritize spending and bondholders will get paid first, the policy change could trigger a virtuous cycle and a reduction in interest rates. Markets may react to a failure to raise the debt limit, but they could also react to an increase. When does the United States’ unwillingness to get its financial house in order becomes a liability that translates a hike in interest rates? Wouldn’t investors get nervous as they watch a country bury itself under yet more debt?
Thursday February 24, 2011 2:17 Veronique de Rugy
2:17
[Comment From Maximus Maximus : ] 
What will be the most likely outcome of this showdown? It seems there will have to be an immediate term agreement in light of the pending debt ceiling breach, and a long-term solution for dealing with the entitlements especially.
Thursday February 24, 2011 2:17 Maximus
2:19
[Comment From Antony Davies Antony Davies : ] 
Re: Maximus. A good outcome is that Congress replace the debt ceiling with a spending ceiling. The debt ceiling doesn't address the fundamental problem that the government has been spending beyond what it is capable of bringing in in revenue.
Thursday February 24, 2011 2:19 Antony Davies
2:20
[Comment From Guest Guest : ] 
Should we balance the budget in 5, 10, or 50 years should we cut $40 billion or $100 billion? What does success look like and why do cuts have to happen now?
Thursday February 24, 2011 2:20 Guest
2:21
[Comment From Antony Davies Antony Davies : ] 
Re: Guest. To balance the budget, we need to cut more than $1 trillion. The cuts proposed in the CAP Act have been called "irresponsible" by some politicians. But, even under these "draconian" cuts, we'd still end up with debt passing 100% of GDP within then next 5 to 10 years.
Thursday February 24, 2011 2:21 Antony Davies
2:22
[Comment From Bruce Yandle Bruce Yandle : ] 
Re DOD question from earlier: Each agency prepares a shutdown plan for OMB. The plan identifies critical personnel and activities that are essential for protecting life and enabling security for the nation. Presumably, DOD has no difficulty justifying continuation of all activities that relate to support of military and defense.
Thursday February 24, 2011 2:22 Bruce Yandle
2:23
[Comment From Matt Mitchell Matt Mitchell : ] 
Re. should we balance in 5, 10….Great question. If austerity requires cuts in too short a time frame, it may—paradoxically—create an incentive for politicians to simply abandon austerity. Yet, obviously, too long of a time frame isn’t effective. I’d say we need credible commitments to begin cutting right now, and achieve balance within 5-10 years.
Thursday February 24, 2011 2:23 Matt Mitchell
2:24
[Comment From Guest Guest : ] 
How long can we go under continuing resolutions before we would have to shut down?
Thursday February 24, 2011 2:24 Guest
2:24
[Comment From Guest Guest : ] 
Why not solve the problem with half spending cuts and half tax increases, isn’t this the kind of compromise we need?
Thursday February 24, 2011 2:24 Guest
2:25
[Comment From Antony Davies Antony Davies : ] 
Continuing from above...What we need to think about is not whether particular cuts are "too much" but rather where they leave us over the next 5 to 10 years. If bond markets start to get skittish as our debt passes 100% of GDP, the cost to the Federal government can be severe. For example, just a 1% increase in the interest rate the government has to pay on its debt translates into an additional $140 billion in spending each year.
Thursday February 24, 2011 2:25 Antony Davies
2:25
[Comment From Bruce Yandle Bruce Yandle : ] 
Re continuing resolutions: We can keep going on continuing resolutions indefinitely
Thursday February 24, 2011 2:25 Bruce Yandle
2:25
[Comment From Veronique de Rugy Veronique de Rugy : ] 
We should start addressing our debt problem today
Thursday February 24, 2011 2:25 Veronique de Rugy
2:26
[Comment From Antony Davies Antony Davies : ] 
Re: half tax/half cuts. Tax increases, historically, don't help. If you look at the past 50 years of data for the US, it doesn't matter whether tax rates are high or low. The Federal government's revenue has stayed constant at about 18% of GDP. What this means is that raising taxes will slow the economy and so the government will get 18% of a smaller pie.
Thursday February 24, 2011 2:26 Antony Davies
2:27
[Comment From Veronique de Rugy Veronique de Rugy : ] 
The debt crunch is driven mainly by the explosion in entitlement reform, so we must reform entitlement reform. However, we didn't get in this mess overnight and it will take some time to fix. Yet, we must start today.
Thursday February 24, 2011 2:27 Veronique de Rugy
2:27
[Comment From Antony Davies Antony Davies : ] 
Continuing...Again, looking at the historical data, revenue isn't the government's problem. It's revenue has been steadily rising -- even after adjusting for inflation and adjusting for population growth. The problem is that spending has been rising even faster.
Thursday February 24, 2011 2:27 Antony Davies
2:27
[Comment From Matt Mitchell Matt Mitchell : ] 
Re. ½ and ½: another great question. It certainly sounds reasonable, but it falls apart when you begin to analyze it. For one thing, if you look at projections, revenue is expected to bounce right back to historical levels (19% of GDP) within a few years. But spending will never return to normal. It will be 15 percentage points above normal by 2035.
Thursday February 24, 2011 2:27 Matt Mitchell
2:29
[Comment From Veronique de Rugy Veronique de Rugy : ] 
Why should we start today? The CBO released a study about the economic consequences of waiting to address the fiscal imbalance and the answer was: higher interest rates, less capital available for economic growth, few jobs, and lower incomes. Here is the link: http://cbo.gov/doc.cfm?index=11998&zzz=41460
Thursday February 24, 2011 2:29 Veronique de Rugy
2:29
[Comment From Bruce Yandle Bruce Yandle : ] 
Re outcome of this showdown: Here's my forecast: Another short continuing resolution will be passed next week to avoid government shutdown. After that, congress and the executive will come to grips partially with the deficit problem in light of Mr. Obama's budget proposal. Cuts will be made in out years for some entitlements. All along tactical games will be played with respect to raising the debt ceiling and adding continuing resolutions as needed. The U.S. will not default on debt.
Thursday February 24, 2011 2:29 Bruce Yandle
2:30
[Comment From Guest Guest : ] 
For federal workers, I believe they were all given back-pay after the last shutdown. There are rumors that this time around, any deal would not include back-pay for days not worked. This could be very financially painful for federal employees, who are in essence being temporarily furloughed against their will. Why should this sector of employees suffer from this political game, when in fact their pay has very little to do with the real problem of government spending?
Thursday February 24, 2011 2:30 Guest
2:31
[Comment From Matt Mitchell Matt Mitchell : ] 
More on ½ and ½ solution: remember, that debt and deficits are bad because they harm economic growth. But we also know that tax increases harm economic growth. So the cure may be worse than the disease. According to Romer and Romer, a 1 percentage point increase in taxes as a share of GDP tends to cause total GDP to be 3 percent smaller than otherwise.
Thursday February 24, 2011 2:31 Matt Mitchell
2:32
[Comment From Maximus Maximus : ] 
What is the "golden" debt-to-GDP ratio? Many economists say 60%. Perhaps it's 10, or 20,...50?
Thursday February 24, 2011 2:32 Maximus
2:32
[Comment From Veronique de Rugy Veronique de Rugy : ] 
Re: ½ and ½:. This is a great question. The problem about banking on tax revenue to address our problem is that it is not clear how much more revenue as a share of GDP the government can actually collect. historically, it hasn't been successful at collecting more than 19 percent in taxes as a share of GDP for more than a few years. Also, economists do agree that higher taxes have a negative impact on the economy, which reduces the GDP and hence reduces revenue. Also the problem is spending.
Thursday February 24, 2011 2:32 Veronique de Rugy
2:36
[Comment From Veronique de Rugy Veronique de Rugy : ] 
Re: What is the "golden" debt-to-GDP ratio? For a long time, economists have said that 60 percent as a share of GDP meant that we were entering a dangerous zone. It's true for most countries but not for all countries. For instance, Japan has had much higher debt ratio than that for a long time. However, most of their debt is due to domestic investors, which does seem to make a different. What we know for sure is that investors rate countries on a curve. So as long as our country looks as a saver investment than other countries we will be fine. Even with a high debt ratio than 60 percent. But no one knows how long that will last.
Thursday February 24, 2011 2:36 Veronique de Rugy
2:36
[Comment From Matt Mitchell Matt Mitchell : ] 
Re. golden: it is tough to say. The most-comprehensive studies suggest that going from 30 percent to 90 percent cuts growth rates in half. The problem is these studies are based on a wide sample of countries and the US is pretty unique. Our lenders are likely to give us more slack than they will others. But undoubtedly, we will not be able to sustain 200 percent, which is what it will be in just 25 years.
Thursday February 24, 2011 2:36 Matt Mitchell
2:36
[Comment From Antony Davies Antony Davies : ] 
Maximus: Good question. I don't know what the golden ratio is (or even if there is one). However, I'd caution you to include unfunded Medicare and Social Security obligations. These two animals don't appear in any of the debt figures, but (at least to some degree) they should be included. When the trust funds go broke, the government will be forced to do one of two things: (1) raise taxes to cover Medicare and SS obligations, or (2) default on the Medicare and SS obligations. In the first case, tax payers pay for the unfunded obligations. In the second case, retirees pay for the unfunded obligations. Either way, someone pays -- just as if the unfunded obligations were debt.
Thursday February 24, 2011 2:36 Antony Davies
2:36
[Comment From Otto Otto : ] 
Who is to blame if the shutdown occurs? Isn't this a sign of poor management i.e. the private-sector equivalent of not making payroll? Who's fault is it and why can't our politicians just work together to avert this disaster?
Thursday February 24, 2011 2:36 Otto
2:37
[Comment From Garett Jones Garett Jones : ] 
Re: bond market @2:01: A shutdown will probably be bad news. Just imagine how Greek bond markets would react if the Greek government couldn't agree on a budget and shut down--- it would sound like they didn't have their act together. With some pols pushing for troubled states to default, it's a reasonable worry.
Thursday February 24, 2011 2:37 Garett Jones
2:38
[Comment From Matt Mitchell Matt Mitchell : ] 
Re. “Isn’t this a sign of poor management?” Yes.
Thursday February 24, 2011 2:38 Matt Mitchell
2:39
[Comment From Antony Davies Antony Davies : ] 
From one perspective, it's not a matter of blame but of congratulations. By that, I mean that politicians have not taken our debt seriously enough for far too long. If a shutdown wakes them up to the severity of the debt problem, then perhaps some good will come from it. But I certainly hope they come to a more reasonable solution.
Thursday February 24, 2011 2:39 Antony Davies
2:39
[Comment From Veronique de Rugy Veronique de Rugy : ] 
re: Who is to blame if the shutdown occurs? I think both parties are responsible for the fiscal situation we find our self in. This problem didn't start with the election of Obama. It didn't start with the Democratic take over in 2006, it didn't start with Bush. But all are responsible for making a bad situation worse and by not address entitlement spending. We have known that it was not a sustainable path for a long time.
Thursday February 24, 2011 2:39 Veronique de Rugy
2:41
[Comment From Guest Guest : ] 
Some comments. The term for essential and non-essential federal employees have now been changed to "excepted" and "non-excepted." I am not sure that there will be a short-term CR passed, with incentives from the House moving in a very different direction from incentives in the Senate and the White House. The calculus is not the same as 1995. Entitlement spending has nothing to do with the shutdown since most of entitlements are not funded through discretionary appropriations. The shutdown also has nothing really to do with the debt celing debate, either. It will have almost no impact on the date when we reach the debt ceiling.
Thursday February 24, 2011 2:41 Guest
2:42
[Comment From Cynthia Cynthia : ] 
So, what do economists think we should trade for raising the debt ceiling -- since it's political suicide not to.
Thursday February 24, 2011 2:42 Cynthia
2:46
[Comment From Veronique de Rugy Veronique de Rugy : ] 
Is it a political suicide? Polls are showing that Americans do not want to see an increase in the debt ceiling. Here for instance, The Hill is reporting that a large share of the American public — 71 percent — opposes raising the federal debt limit. Moreover, the debate over the debt ceiling is really about a bigger problem.
Thursday February 24, 2011 2:46 Veronique de Rugy
2:47
[Comment From Antony Davies Antony Davies : ] 
2:42: We should trade two things: (1) a spending ceiling that is 18% of GDP, and (2) a repeal of the Impoundment Act so that the President can withhold dollars that Congress allocates. The first item has the greater short term impact. The second item has more of a longer term impact as it gives the President the power to close the spending purse.
Thursday February 24, 2011 2:47 Antony Davies
2:47
[Comment From Paul Paul : ] 
The GAO released a report about what the Treasury did previously when having to raise the debt ceiling...and the world did not fall apart. So what's the big deal?
Thursday February 24, 2011 2:47 Paul
2:47
[Comment From Garett Jones Garett Jones : ] 
Re: Otto. The Rodney King question is important: why can't we all just get along? But blame is the wrong way to analyze this: A firm can fail just because their product becomes unpopular---similarly, tax revenue typically collapses after a financial crisis. It's always tough to slice a smaller pie, so these fights are natural.
Thursday February 24, 2011 2:47 Garett Jones
2:49
[Comment From Antony Davies Antony Davies : ] 
Paul: The debt ceiling has been raised 70+ times since the 1970s. This suggests that the debt ceiling is purely a fiction. A ceiling isn't a ceiling if Congress can lift it whenever it gets close.
Thursday February 24, 2011 2:49 Antony Davies
2:49
[Comment From Bruce Yandle Bruce Yandle : ] 
Re golden debt: Evidence that deficits affect GDP growth adversely is associated with a 60% ratio. At that point, GDP growth is affected to the point that it is difficult to service the debt and continue normal government operations.
Thursday February 24, 2011 2:49 Bruce Yandle
2:50
All, we have 10 more minutes and would like to get as many questions in as possible. Please submit any more questions and we'll make sure the scholars get the chance to respond!
Thursday February 24, 2011 2:50 
2:51
[Comment From Bruce Yandle Bruce Yandle : ] 
Re federal workers' suffering: Workers are being furloughed nationwide due to budget shortfalls; these include teachers, healthcare workers, as well as workers in the private sector. But those furloughs are done deliberately with notice to those affected. Federal workers deserve the same treatment. They should be given notice of shortfalls and then be informed of the duration of the furlough. Furloughs are tough, but these are tough times.
Thursday February 24, 2011 2:51 Bruce Yandle
2:51
[Comment From Veronique de Rugy Veronique de Rugy : ] 
I am not sure what economists would argue is the right thing to ask for in exchange for an increase in the debt ceiling but I am thinking that at the very least we would like to see a serious commitment to curbing the explosion in entitlement spending. Also, I think we really should think about the consequences of raising the debt ceiling. It is not a risk free event.
Thursday February 24, 2011 2:51 Veronique de Rugy
2:51
Veronique, how is it risky, to amplify the guest's question
Thursday February 24, 2011 2:51 
2:52
[Comment From Bruce Yandle Bruce Yandle : ] 
Re debt ceiling: Since 2002, the debt ceiling has been raised each year, twice in 2008. And each year, the deficit has grown larger. This is "bullet-biting time." We must find the resolve to cut spending, broaden the tax base, cut marginal tax rates, and get the deficit on a negative growth path. This should be done in conjunction with raising the debt ceiling.
Thursday February 24, 2011 2:52 Bruce Yandle
2:54
[Comment From Veronique de Rugy Veronique de Rugy : ] 
Paul: The debt ceiling was raised 10 times in the last 10 years, some years more than once. The debt limit is a very poor budget constraint. First and foremost, it does not alter the spending and revenue policies that determine debt and deficits. But we also need to remember that raising the debt cap is only a symptom, not the cause, of the bigger problem: the endless appetite of the federal government for spending taxpayers’ dollars.
Thursday February 24, 2011 2:54 Veronique de Rugy
2:54
[Comment From Veronique de Rugy Veronique de Rugy : ] 
Think about it this way, if you want to lose weight, the only solution is to stop eating. Just telling yourself that you can’t gain an additional 30 pounds this year won’t help. In fact, it will make things worse. Identically, Congress should stop spending money instead of ruling that it should increase the debt by some hundred of billions of dollars this time around.
Thursday February 24, 2011 2:54 Veronique de Rugy
2:55
[Comment From Guest Guest : ] 
How do we solve this larger problem? We've raised the debt ceiling a dozen times, aren't we just going to have to do it again? Is there a way to break the cycle?
Thursday February 24, 2011 2:55 Guest
2:56
[Comment From Bruce Yandle Bruce Yandle : ] 
Re Guest some comments: Good points and agreed. Since 1977 there have been 12 or so government shutdowns, usually for one to three days. 1995 is the outlier, in terms of length and related public outcry. A shutdown for a few days will not likely generate a huge outcry, and allowing a shutdown, as you suggest, has little to do with the larger deficit question and the possibility of default.
Thursday February 24, 2011 2:56 Bruce Yandle
2:56
[Comment From Antony Davies Antony Davies : ] 
Guest: There is only one way to break the cycle: stop spending so much. For example, if we took 2004 Federal spending and grew it to account for inflation and then grew it again to account for population growth, we'd have a balanced budget this year.
Thursday February 24, 2011 2:56 Antony Davies
2:57
I'll ask what others might, Ant: why can't we break the cycle by spending less AND raising taxes?
Thursday February 24, 2011 2:57 
2:57
[Comment From Veronique de Rugy Veronique de Rugy : ] 
To break the circle we have to implement strict budget rules that prevent Congress from spending endlessly. We need to reform entitlement spending, it is key to our long-term situation.
Thursday February 24, 2011 2:57 Veronique de Rugy
2:58
[Comment From Garett Jones Garett Jones : ] 
2:42:There's nothing to 'trade' in exchange for raising the debt ceiling--- it's going to happen. Precisely because it's must-pass, pols want to get their hard-to-pass issues onto the debt ceiling bill. Issues that a slim majority grudgingly support---that's what you put onto the debt ceiling bill.
Thursday February 24, 2011 2:58 Garett Jones
2:58
[Comment From Veronique de Rugy Veronique de Rugy : ] 
Also, it is important to separate the facts from reality. It wouldn't be hard to balance the budget by 2020. As Nick Gillespie and I have shown in this piece, http://reason.com/archives/2011/02/14/the-19-percent-solution, ll it takes, it a reduction is the growth rate of spending.
Thursday February 24, 2011 2:58 Veronique de Rugy
2:59
[Comment From Antony Davies Antony Davies : ] 
No, even if raising taxes helped (which, history suggests it doesn't), raising taxes only hides the problem. The problem isn't revenue. The problem is spending. To extend Veronique's analogy, buying bigger pants doesn't solve a weight problem. The only thing that solves the weight problem is to eat less and move more.
Thursday February 24, 2011 2:59 Antony Davies
3:00
[Comment From Matt Mitchell Matt Mitchell : ] 
Re. 2:55: there is a precedent for breaking the cycle. Harvard’s Alesina has analyzed the experience of other countries and found that spending reductions are more effective than tax increases. Moreover, we can look to examples such as Canada where 6 dollars in cuts for every 1 dollar in tax increases really did work. More here: http://neighborhoodeffects.mercatus.org/2010/11/15/can-a-reduction-in-government-spending-stimulate-the-economy/
Thursday February 24, 2011 3:00 Matt Mitchell
3:00
[Comment From Veronique de Rugy Veronique de Rugy : ] 
However, balancing the budget without reforming entitlement would balance the budget and maybe send the signal to our investors that we are serious about our budget problems, but it would only be balanced for a few years.
Thursday February 24, 2011 3:00 Veronique de Rugy
3:00
[Comment From Garett Jones Garett Jones : ] 
Remember this as long as pols aren't self-destructive, the debt ceiling is a sideshow--- the real issue is the collapse in post crisis tax revenue and entitlements.
Thursday February 24, 2011 3:00 Garett Jones
3:02
[Comment From Veronique de Rugy Veronique de Rugy : ] 
By the way, it is important to remember not reforming entitlements today will lead to a reduction in benefits in the future. Take Social Security, for instance. By refusing to reform Social Security, we are guaranteeing automatic benefit cuts of about 22 percent for everyone on the program in 2037 (when the trust funds are theoretically projected to run dry) without having had retirees plan for a replacement income.
Thursday February 24, 2011 3:02 Veronique de Rugy
3:02
OK, we're at the top of the hour! I really appreciate everyone's participation. This chat will be posted on the web for the future at mercatus.org/newsroom. If you have further questions for scholars, please contact me at cbehan1@gmu.edu or Annie Dwyer at adwyer2@gmu.edu.
Thursday February 24, 2011 3:02 
3:02
 

 
 
 
For more information or to book an interview with the scholars featured in this article, please contact Annie Dwyer, Media Relations Manager

Featured Scholars

Veronique de Rugy

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University. Her primary research interests include the federal budget, homeland security, taxation, tax competition, and financial privacy issues.

Bruce Yandle

Bruce Yandle is a distinguished adjunct professor of economics with the Mercatus Center at George Mason University. His primary research interests are public choice, regulation, and free market environmentalism. He is dean emeritus of the Clemson College of Business and Behavioral Sciences.

Matthew Mitchell