How do you view the standoff and the way your party and the president have handled it?
I think it’s totally dysfunctional. The problems we have are really resolvable issues: the deficit and the debt. We went off on a side road that was really a dead end, which was repealing Obamacare, which had no likelihood of success because of the divided government. The president is not about to repeal his signature event any more than Republicans are about to raise taxes. That we went down this rabbit hole was just foolish and tactically absurd for Republicans. Now they appear to be on track as to what they can actually agree on, which is how you get the debt under control.
Has all of this done irreparable damage to the Republican Party?
The party is off track, primarily because of a few folks who really don’t have an interest in governing. They have an agenda that’s personal. Is it lasting damage? I don’t think so. It’s just certainly set us back politically. It set back the primary goal of most Republicans, which is fiscal responsibility.
When Obama says he’s not going to negotiate about the debt ceiling, does he have a point?
Clearly he doesn’t. The debt ceiling has been used for years; it’s a point where the discussions get focused. Our congressional system doesn’t work well unless it has a forcing point. One of the primary forcing points since I was first in the Senate 18 years ago has always been the debt ceiling.
Will a default be avoided?
I cannot believe that we, as a nation, would default on our debt. That would be an absolutely inexcusable act of malfeasance by our government. The unintended consequences cannot possibly be anticipated. You’re already seeing the bond markets adjusting the price of short-term maturities. That means we’re going to have to spend more money to pay them off. You can see where the currency of the world, which is basically Treasuries, will become suspect. When that happens, you’re going to get ramifications that could lead to a slowdown here in the U.S. and across the globe.
It seems Speaker Boehner is now talking about entitlement reform, rather than Obamacare, as a bargaining tool on the debt ceiling. How do you see that?
I think we’re seeing a glimmer of hope here. The pathway to getting something done … the fog is starting to lift on it. That this has shifted from repealing Obamacare to a substantive discussion on how you get the deficit and debt under control is very positive, because that’s a very resolvable issue. I can see what I call a mini grand bargain, where the continuing resolution, the debt ceiling, and the sequester are all rolled into one issue, and you resolve it by replacing the sequester in large part with entitlement reform. There’s a lot of good folks on the Hill talking about this approach, and it’s very doable.
It’s been five years since the financial crisis hit. Will the Dodd-Frank reforms prevent it from happening again?
Some of [Dodd-Frank] is constructive. A great deal of it is not. Too big to fail isn’t a legitimate issue any more. The banks are massively capitalized now. Will there be another crisis of the type we had in 2008? I think it’s unlikely. If it were to come, it would probably come again in the housing market.
You’ve warned us about debt. What else is holding back the U.S. economy?
We’re on the verge of one of the largest economic expansions in our nation’s history. We’re truly at the point where you can see extraordinarily bright days ahead. We’re going to have the lowest energy costs in the world. We’re still the place where all the great ideas come from. We have massive liquidity waiting on the sidelines to help out people who want to be entrepreneurial. And most important is our basic culture: We’re people willing to take risks and create jobs, so we’re really on the verge of a very positive economic period.