U.S. debt ceiling plans take some shape

U.S. dollars are counted at a forex exchange inside a shopping mall in Kuala Lumpur.

JEREMY HOBSON: Well now to the debt ceiling fight in Washington. We are 12 days away from a possible default here in the U.S. if Congress and the President can't reach a deal to raise the debt ceiling. The focus now seems to be shifting toward some kind of short term extension of the deadline so that lawmakers have more time to come up with some grand budget cutting plan.

Diane Swonk is chief economist with Mesirow Financial. She's with us live from Chicago as she is every Thursday. Good morning.

DIANE SWONK: Good morning.

HOBSON: Well Diane let's start with the idea they're talking about in Greece -- a temporary default. Is that something that could work here in the U.S. if there's no deal to raise the debt ceiling?

SWONK: Absolutely not. I mean the issue in Greece is that everyone knew eventually someone would have to take a haircut and they would have to default because they didn't have the means to service their debt or their commitments. We're not in that position. If we were to do it, it would be because we decided to do it and penalize our investors. And that would have a very negative reaction.

HOBSON: OK, well, let's talk about what would likely happen in the United States. What do you think? It seems to be it could really go any direction?

SWONK: Well it looks like we're going to get a temporary deal -- a deal that's going to say, listen we'll raise the debt ceiling today, and we're going to commit to getting a very strong commitment with a lot of Plan B in it to make sure that lawmakers follow it to get over $4 trillion in cuts through the bipartisan Gang of Six commission that has been working on this for some time. There's not a lot of details -- the dirt and the details will be hammered out in committees within Congress, but also have a backup plan that if they don't get the numbers in, ten senators will take their place. And I think that's what the rating agencies need to actually feel comfortable that we're moving in the right direction.

HOBSON: Well it sounds like it makes sense, but it also looks like this kind of stuff could really go off the rails in Washington -- that the Speaker of the House and the President don't have total control over what their parties are going to do.

SWONK: That's the real problem is that you know, Congress has always sort of handled this is at a last minute kind of ordeal And the problem is, that worked when it was child's play, when this is games that were just political games being played out in Washington, this is the real economy now they need to be grown ups and they need to step up to the plate and get it done. So we absolutely cannot risk it not getting done although that is still a risk today.

HOBSON: Diane Swonk, chief economist with Mesirow Financial, thanks as always.

SWONK: Thank you.

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