program. msnbc's newest star is already our biggest star. alec baldwin will be here. alec will join me tomorrow night. chris hayes up next. good evening from new york. i'm chris hayes, and today amidst continuing crisis, president obama took command of the news in a way only a president can do. speaking for more than an hour he laid out his position, congress must do its duty by reopening the government, and raising the debt ceiling before the administration goes into any budget negotiation. he's willing to talk he said, just not under the threat of catastrophe. >> the american people do not get to demand a ransom for doing their jobs. you don't get a chance to call

onbank and say, i'm not going to pay my mortgage this month unless you throw in a new car and an xbox. and the house republicans in particular don't get to demand ransom for doing their jobs. >> when asked about a default, the president said he was "nervous." >> this is not something we should even come close to fooling around with. and so when i read people saying, now this wouldn't be a big deal. we should test it out. let's take default out for a spin and see how it rides. that's not something we should even be in a conversation about. >> and at around the 45-minute mark of his press conference and sounding clearly exasperated, the president apologized. not for his own actions but the government's as a whole. >> i know the american people are tired of it. and to all the american people, i apologize that you have to go through this stuff every three months, it seems like. and lord knows, i'm tired of it. >> a short time later speaker john boehner stepped before the

cameras and in front of the flags. >> the president's position that, listen, we're not going to sit down and talk to you until you surrender is just not sustainable. it's time to have that conversation. not next week. not next month. the conversation ought to start today. >> just so we're clear, when speaker john boehner says the word surrender, he's saying vote on a bill on republican levels. feeling zero pressure to reopen the government, because on day 8 of the shutdown, how do republicans think they're doing? just fine. >> does anybody remember charlie sheen when he was kind of going crazy last year, and he was going around jumping around saying, winning, winning, we're winning! wow. winning. well, i kind of feel like that. >> and in this one the democrats are the ones who appear mean.

>> democrats miscalculated. >> winning this fight right now is the most important thing we can do. >> i think the path we have laid out is a good one. >> i know we don't want to do this. we're going to win this fight. >> whether it's been the result of strategy or just grand good luck, the republicans are winning. >> the republicans are flushed with confidence that they have the support of the american people, and they are showing no signs of slowing down. in fact, quite the opposite. yesterday, 22 house moderates were on record supporting a so-called clean cr to fund the government, just 24 hours later, the same house moderates are backtracking, and now, republicans are demanding a full delay or defund of obama care as the price of raising the debt ceiling. >> you think that some facet of the president's health care plan should be attached to an increase in the debt celling? >> yes. >> we've just got to put obama care on hold. >> i'll do anything i can to protect the american people from

obama care. >> republican congressman scott garrett said if a debt ceiling deal doesn't have a full delay or defund of obama care, i know i and many others will not be able to support whatever the leadership proposes. the president has repeatedly assured republicans this will never happen. >> i'm going to repeat it. there will be no negotiations over this. the united states government p pays its bills. that's non-negotiable. we're not going to negotiate around the debt ceiling. >> the republicans think they have the support of the american people. the latest polling finds that 70% of americans disapprove of congressional republicans handling of the budget. that's up from 63% just last week. the latest national journal poll are even worse than the gop. 80% of nonwhites oppose tying government funding to obama care, along with 70% of men and women with a college education, and 70% of people 18 to 29.

republicans are getting killed in the polls among precisely the groups they've pledged to woo, and they still think they're speaking for the nation as a whole, but the republican party has a history of this sort of delusion. >> i'm going to ask you a straight out question, you went through this in 2000, you almost went through in 2004. do you believe that ohio has been settled? >> no, i don't. >> i think this is premature, i don't know what the outcome is going to be, but you got to be careful of calling things when we have like 991 votes separating the two candidates and a quarter we have to count. >> it was robert's article yesterday in which scott garrett actually said that quote that we used in the clip there. all right. robert, where are we today? john boehner came out and gave a somewhat strange staged address in front of those flags. are we any closer today to a resolution? what is the thinking, the latest thinking, among the house caucus

and the leadership about the way out here? >> i think we have to get beyond the rhetoric from both the white house and speaker boehner today and i think we're actually inching closer to some kind of compromise. it seems like both sides want to get through next week, continue to ratchet up the rhetoric, but ultimately they may have a short-term debt limit extension and this may enable future budget talks. >> do you think the debt limit ex-tense would come hand in hand with a short-term er? essentially a month or so of time bought in which the government could be up and operating, we aren't defaulting and some kind of conversation can happen in that month? >> when you talk to democratic sources you hear if the republicans are going to move toward a short-term cr they would also like to see the government reopen. so i think that's going to be a bargaining point next week. for now, they're somewhat open to a short-term debt limit. that's interesting. >> when you're talking to members of the house tea party caucus, the folks that signed that letter back in the summer demanding a defund of obama care

and the continuing resolution. they're saying we need to see a delay in obama care to see a delay in the debt increase. do they understand that can't and will not happen or do they really think it's going to happen? >> no. it's a genuine belief, and who's in the corridors of the capitol every day, they are so frustrated because they started this defund repeal effort in the summer. they followed through now with a standoff and stalemate and they're not yet ready to concede any ground. that's really john boehner's dilem dilemma. how does he deal with people that don't want to deal with anything. >> that gets me to what's been a strange evolution in the eight days of the shutdown. in the beginning the demand seemed to be a one-year delay on the individual mandate, this provision about how congressmen and their staffs would pay for health care. now the demand itself seems to be negotiations. it's almost unclear what substantively they want, what the out is, what would count as victory?

>> it's a great question. i sat down with senate minority leader a month ago. he always wanted entitlement reform and you look at paul ryan's op-ed in the "wall street journal" tomorrow morning that just posted online. he's talking about sequester trades, entitle reform, and with chain cpi. that's what republican leadership has always been moving toward, entitle reform and budget talks whereas the tea party reform has been focused on obama care. >> joining me now is a democrat from michigan. thank you for that. i am seeing the conversation turn from the discretionary budget, funding levels at sequester levels, et cetera, already somehow the conversation is moving towards quote/unquote entitlement reform, social security benefit cuts. what do you think about that? >> chris, first let me say that democrats are totally united in making it very clear we want the

government opened up. with want to pay our bills, and then we are happy to negotiate or continuing negotiating on a wide variety of things. today on the floor of the senate, senator murray, chair of the budget committee moved for the 20th time moved to go to conference committee on the budget so we can address a wide variety of issues, and republicans objected. so this makes absolutely no sense. when you look at it, republicans always say we should run government like a business. well, if a business was run like this, they would be in total mess, and it makes -- it's really embarrassing to me. we're talking about the full faith and credit of the united states government. we're talking about what's happening to families. >> let me re-ask that question, though, because i am seeing this conversation in elite circles among republicans. paul ryan's op-ed that's coming out in the "wall street journal." the words entitlement reform, suddenly dropped into the conversation out of nowhere. and we're talking about a continuing resolution on

discretionary funds for the budget. what is your reaction to hearing that word bandied about as a possible out for the impasse we find ourselves in? >> chris, i'll support things that strengthen medicare and social security for the future. we have a fundamental difference with republicans. frankly, the same kind of scare tactics being used now on health care reform were the same kinds of words used when medicare was passed, or when social security was passed. we have a fundamental difference. when we come together, we as democrats will support those changes like negotiating prescription drugs to bring down the cost of medicare, or doing things that strengthen social security for the future. but, again, we are not going to allow social security for tens of millions of americans to be held hostage when they won't open up the government or pay our bills. >> in terms of --

>> if they want to sit down and talk long-term within the guidelines of strengthening medicare and social security, certainly, we've already been doing that. >> in terms of opening up the government, chief economic advisor gene spurring talked about something along three weeks or a month. what is your reaction to that idea? >> again, we're in lock step as democrats together. and if the government is reopened, public services from food safety to the intelligence services to helping moms and babies on the wic program. if we make sure that we are not defaulting on the full faith and credit of the united states of america, if those two things are happening, obviously, the longer the extension -- >> you're not foreclosing the possibility of some sort of short-term solution in the intermediary? >> correct. what i would say is the longer the better for purposes of the economy. >> i think everyone agrees.

senator debbie salve n.o.tabeno you. >> hello, america, how are you all doing? i'm a guy, i'm a large animal veterinarian, never been in politics before. >> that was republican congressman ted yoho introducing himself to america. from florida. a guy who added his photo to his campaign bumper sticker to make sure voters didn't think he was japanese. he's now in washington running your government. we'll continue the introduction ahead. that's why we designed the all-new nissan versa note, with more technology, to get you into, and out of, tight spots. and more space so that you always have your favorite stuff. and, just for good measure, an incredibly efficient 40 mpg highway. so that when you're doing more, you're spending less. the all-new nissan versa note. your door to more. now get a $139 per month lease on a 2014 nissan versa note. ♪

coming up next, the man who wrote this -- we have elected e an ungovernable connection between bag men and outright frauds. so ungovernable that it insistence the government is ungovernable. we have elected people to governors who do not believe in government. i can't add to that but i bet you can.

tonight's question, how do we get out of this mess? tweet your answers or post at facebook.com/chris. i'll share a couple at the end of the show. stay tuned, we'll be right back. to have enough graduates to fill 21st century jobs... ...we'll have to solve this gender divide. let's inspire more young women to pursue math and science. let's light the way for a new generation. join exxonmobil in advancing math and science education. let's solve this.

if you would like to know why the united states government is shut down right now, much of the answer lies in this letter. august 21, congressman mark meadows, republican north carolina to speaker john boehner and house speaker eric cantor. a letter demanding the house defund obama care as a condition of passing the continuing resolution. at the time this was nothing more than a ceremonial for fringe comment. red state common thread printed

out and put on paper, but this is now the governing blueprint for the two parties. as we look through the signatories on this, it occurred to us that while some of these people are well known to you such as congresswoman michele bachmann, many are not but they should be. because they run the republican party and they own this crisis. tonight we introduce our new segment, these are the people who are running the country. featuring the small click of rabid extremists. they've taken control, even though they only represent 1/30th. our inaugural member, ted yoho when it was reported that he said this about the country defaulting, i think we need to have that moment where we realize we are going broke. i think personally it would be stability to the world markets. an idea so daft that i asked his republican colleague about it last night. your colleague congressman yoho said that actually breaching the debt ceiling would bring stability to financial markets.

do you agree with him? >> no, not at all. i think that's crazy talk. >> so who is ted yoho? he's a freshman republican congressman who pulled off an incredible victory in 2012, vanquishing a 12-term incumbent. yoho won that primary by 829 votes with the backing of congresswoman michele bachmann and former congresswoman alan west. a district well drawn by heavily republican legislature. yoho is a member of the florida veterinarian medical association and the florida association of equine practitioners. it showed in this ad. >> career politics are like pigs feeding at the trough. the career politicians have given us $16 trillion in debt. it's time for my leadership, i'll repeal obama care and balance the budget. >> carefully riding the wash. wave. >> so you accept the fact that he was a born american?

>> ah -- no comment. >> are you a birther then? >> i'm not going to comment on it, chris. >> yoho had previously said in a town hall meeting that he would consider co-sponsoring congressman steve stockman's birther bill. in that same town hall meeting last august yoho said this about the tanning bed tax in obama care. >> i had an indian doctor in the office the other day, very dark skin and two non-dark skinned people, and i asked -- they started laughing, and i said, have you ever been to a tanning booth? he said, no. no need. i got taxed for the color of my skin. >> like many in the tea party, yoho views himself as engaged in an epic struggle. a struggle for justice right up there with some of the great struggles in history. it only takes one with passion, he said, look at rosa park, martin luther king, people with

passion that speak up. they'll have people follow them because they believe the same way. smart leadership listens to that. joining me now is charles for "esquire" magazine. the 113th congress about the reign of morons this year. charlie, you have been covering politics for longer than i have. and i think there's a temptation when someone covers politics to say this is the worst its ever been. these craven crooks and maniacs running capitol hill, they'll the worst. give us some historical perspective, is it as bad as it appears to me? >> well, i don't go back to the congress of the 1850s, regardless of what i like lie to you on the tv screen. i can't speak for the pre-civil war era. but i'm old enough to remember what went on in the '60s and what went on when the first reagan class came in with larry pressler from south dakota and bob caston in wisconsin and that

bunch. they were pretty wild, but nothing compared to this. i mean, you are talking some of the great live theater of all-time now. >> it is -- >> i'm sorry. and now what are we going to do? now what do we get? another supercommittee. >> michele bachmann is a perfect example, but in most cases they don't have a lot of power, wield a lot of influence. incredible about this, is that all the folks that we kind of delight in showing you crazy clips of who are in better times, i assume, i guess side shows, are genuinely running the strategy and calling the shots now in the house republican caucus right now. >> that's because there is no longer a republican establishment. i mean, there is not gray eminence. there's no gym baker who's going to get everybody in a room and knock their heads together and

tell them to knock it off. there is just a galaxy of the independent power bases, there's a galaxy of independent billionaires who will do with their money what they will do with their money and don't care what ryan or john boehner thinks about it. one of the problems is you have people who are not only insulated in safe districts but are empowered independently by these other centers of power who answer essentially to no one. >> i'm glad you made that point. it was said on cable news how these are safe districts, safe districts, safe districts. but jerrymanned how seats -- jerry mandarin can't be the thing that explains all of what's going on. >> well, no. i grew up in chicago and new

york, and believe me, no one voted for congress who's running in a competitive election. so jerry mandarin can't be the thing that explains all that's going on. there's more to it than that. there is what i think both oddly enough a fracturing and a strengthening of the republican party. fracturing in that there is no republican establishment anymore. but strengthening in their incredibly powerful centers of influence with a lot of money behind them that operate independently. >> and what we've seen is, the decentralization of that power has empowered these kinds of people that are now rising to the front, and no one can even stop them from becoming the face of the party? >> no. and that's why i think all of these -- and i'm sure that, you know, members of congress said what they said when the msnbc researchers batted their eyes at the members of congress. but the fact is, i don't think there's 20 people who will vote for a continuing resolution among the republicans. you are talking about people who

will instantly become the tuti rhinos of all time. >> go talk to cliff sterns in congress 22 years and got his butt handed to him. >> the unshirted hell that will be released upon these people once that do that, and i'm also at the house republican caucus. i'm not seeing 20 of those. i'm lucky if i see three. >> we'll be right back with clip three. good story. we'll be right back. for seeing your business in a whole new way. for seeing what cash is coming in and going out... so you can understand every angle of your cash flow- last week, this month, and even next year. for seeing your business's cash flow like never before, introducing cash flow insight powered by pnc cfo. a suite of online tools that lets you turn insight into action.

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rep. rokita: obamacare hurts this country much more than any government shutdown. vo: reckless. rep. blackburn: people are probably going to realize... they can live with a lot less government. vo: destructive. rep. bachmann: this is about the happiest i've seen members in a long time. vo: the government shutdown is hurting veterans, seniors, and our kids. now tea party republicans are threatening... an economic shutdown. refusing to pay our nation's bills. endangering american jobs. tell them to stand up to the tea party. enough already!

there is some breaking news this evening as the white house says president obama is set to name janet yellen as his next nominee to be the next chair of the u.s. federal reserve to succeed outgoing chair ben bernanke. she would be the first woman to hold that position. the announcement is scheduled for 3:00 p.m. tomorrow afternoon, and yellen is likely to step right into the middle of a hot financial mess, if congress continues to threaten to not raise the debt ceiling on october 17th. and if you thought the government shutdown was bad, wait until you see what a debt ceiling breach looks like. we're going to explain why it might make the 2008 crisis look quaint. but first i want to share the three awesomest things. on the internet today. exasperated by the shutdown. the playoff game between the atlanta braves and the los angeles dodgers. i bet you didn't know the game could be linked to the shutdown. neither did republican congressman jack kingston of georgia, taking the logic of the

shutdown and applying it to baseball detailing last night's loss by the braves, he writes -- we must have sent batters to the plates at least 40 times. but the dodgers refused to relinquish the title. and worse, they won't even discuss it. if the dodgers won't listen to cries of average americans like you and me, then congress should outlaw major league baseball until the dodgers cave. if that means the country will be deprived of its natural pastime, the dodgers will have only themselves to blame. game on. in another digital post, directed to a couple who would have let the shutdown rain on their wedding day. a couple that was supposed to get married in yosemite, they just posted this pic. look at that, it's the national bird. congratulations to the bride and groom. the second awesomest thing on the internet tate. we know amy poehler rocks. she was speaking about a charity called worldwide orphans

foundation. she was overcome by emotion when talking about the children in need. >> and so who are we to be in this room and to be living this life without helping them? you know, that's it. that's the simple truth. i'm sorry. >> but a comedian as good as poehler is not going to let the touching moment go without a laugh. >> if you take one thing from this event, please remember that giving to charity is good for your skin, and it makes your ass smaller. >> great advice. it's a diet that even ron swanson would love. and the third awesomest thing today, a rabbit hole. a tv tried to promote a spinoff series called once upon a time from the wonderland. pop-up screens on the bottom of the screen. the character was trapped in an uncompromising position as captured here by an instagram user.

yep. looks like a white rabbit drew his magic portal in just the wrong spot. the image of this graffiti quickly went all over the internet. snow white's magic crotch. arguably promotes the new series in a whole new viral way that prompted a tweet from snow white herself. i'm not viral. and they lived happily ever after. you can find all the links along with chris.com. we'll be right back. but they didn't fit. customer's not happy, i'm not happy. sales go down, i'm not happy. merch comes back, i'm not happy. use ups. they make returns easy. unhappy customer becomes happy customer. then, repeat customer. easy returns, i'm happy. repeat customers, i'm happy. sales go up, i'm happy. i ordered another pair. i'm happy. (both) i'm happy. i'm happy. happy. happy. happy. happy. happy happy. i love logistics.

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i want to show you the way people are getting their information online these days. here's the "new york times," that's their traffic. here's huffington post and here's redding right up here at the top. i suspect a decent portion of you and just said, what is

reddit. it's not just a news source, it's a universe filled with user generated content and links that enjoys massive traffic. if you saw an internet video or a gift this week, that people were passing around and posting on facebook, odds are very high that it started on reddit. that yeah, that one's awesome. in fact nearly all of the wonderful and terrible thing that make up the internet can be found on reddit. it's called the front page of the internet and it was co-founded the man that's been named the mayor of the internet. how the 21st century will be made not managed. it's great to have you here. so in the book sometimes there are moments where you flirt with and in some ways just fort forthrightly assert a vision of kind tech know optimism. which has a long lineage, right, the idea that there's the institutions and organizations and rules we have now and technology renders meant much of

that's obsolete. allows us to bypass obstacles in our way. defend that for me. >> there are plenty of people that have come before me, and very smart men have written entire book. the master switch, plenty other platforms, just as dekplook tizing. that ended up not to be. >> co-ordered becoming huge concentrated power. >> becoming corporations. so this is not at all guaranteed. precisely. but what is so interesting and we're seeing it happen every day now as more people get access and more people get the skills to make the most out of that access, more people are getting the opportunity to bring their ideas to the world. >> so here's what i think is interesting about this. we're talking about the political context about the death of the institution of the republican establishment. and if you said to me, okay, i'm going to describe to you the death of the party establishment. i'd be like, right on. groovy. i don't like establishments! i want the power devolved outward, individual members to speak for themselves.

what it is doing is causing absolute political and institutional havoc. yeah it is. it is indeed. i don't think it's directly a causal relationship with the internet. but one of the areas where i hope the internet can make government better is in bringing more accountability and transparency. we have a certain expectation that we can see a certain breakfast on our phones, why can't we get that same insight into our public officials? into what they are doing and what they aren't doing? >> it's actually making things harder to operate. and i think this goes to your thesis is that the technology does have a way of disrupting the old way of doing things. a way of disrupting the old way of doing things. i want to talk to you about silk road, which i think is one of the most fascinating stories happening right now. if people are not familiar with that "silk road "e "was a hidden internet black market where you could buy anything, and a lot of

people bought a lot of drugs. that was the main thing it was used for. hidden on the internet using a product called tore, which is people in repressive regimes use it to hide from governments. they just got busted by the government. to me, it shows everything that's kind of amazing and dangerous carving out where's no state can touch them? >> yeah, and it's a gift and a curse of technology. we praise that exact same technology because it lets dissidents in china see anything think want. the reality is humans are resourceful. you know, prohibition, whether it's in meet space or cyber space is not guaranteed to work. all of those transactions happened with bit coin. some of the biggest bit coin, like paypal. >> stop there and explain bit coin. >> it's a digital crypto -- very

clever math. away for people to transfer goods and services. >> it is an independent internet traded and used currency that is not attached to any nation? >> nothing. and this sort of pay-pal for bit coin noticed actually a really small drop after the shutdown of silk road. and so it led a lot of us to believe, all right. there was a sector of this internet economy using it for illegal purposes but actually it wasn't that big. in the same way people use cash money to buy drugs and illegal services most of that cash money is actually used for pretty benign reasonable things. >> the conversations we've been having, snowden live rations and about the nsa. there's a certain argument that says we're just in a post privacy world and we have to just accept that, because we have already accepted it, we sign terms of service, there is no privacy left. what do you think about that? >> the difference is, whether i'm taking a photo of my cat, i am doing that with the expectation that i am sharing it

with the world. there are areas, whether it's online or off where we expect to have privacy and i think what the nsa revelations have shown us is that most americans really want to draw a boundary, if you want to get access to my mail or my home. you have to get a warrant, there's due process. if you want to get access to my digital mail, you have to get a warrant. >> i'm curious to see how this plays out whether that "most" that's operative. i think there's been a kind of normalization of this sort of invasion that's happened partly because of the way we share. author of "without their permission" thanks so much for coming by. >> thanks for having me. when you hear the phrase raising the debt ceiling, you think that's adding for debt. the president said that's not what it means. but the republicans everywhere are rejoicing that the debt ceiling is a confusing thing to understand. so we are going to make it crystal clear, coming up. my wife takes centrum silver. i've been on the fence about it.

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♪ like they helped millions of others. by listening. planning. working one on one. that's what ameriprise financial does. that's what they can do with you. that's how ameriprise puts more within reach. ♪ if congress refuses to raise what's called the death ceiling, america would not be able to meet all of our financial obligations for the first time in 225 years. and because it's called raising the debt ceiling, i think a lot of americans think it's raising our debt. it is not raising our debt.

this does not add a dime to our debt. >> that was president obama at a news conference today trying to help americans understand the debt ceiling is not necessarily what they think it is. the problem for the president is the concept is complicated enough that it is really easy to mislead people about what the debt ceiling actually is. which is extremely frightening considering what's at stake. the debt ceiling. it's complicated, about instruct and easy to misrepresent, which is perfect for conservatives. >> we're not going to give the president a clean debt ceiling increase. that's like maxing out your credit card. >> it's like increasing the amount that you can charge on your credit card. >> your daughter runs up the credit card, and has access to it and just goes crazy on it. you're going to say, we're going to pay the bill, but we're going to change things in the future. >> no family in america can spend more than what it brings in for 55 of the last 60 years.

>> you'll be hearing a lot of this, and it cannot be suppressed enough. your household budget and the budget of the united states federal government are nothing alike. >> we have in my household budget, some bills that have to be paid and some bills that we can defer or only pay partially. >> a couple of crucial differences. unlike, say, your next door neighbor, for example. the u.s. government has the world's largest army. and it likes to keep that army busy with multiple simultaneous foreign entanglements. the government also operates an insurance program for 300 million people. you might have heard of that. these things are expensive and the united states routinely borrows money in order to operate. that's not some terrifying crisis. that's the norm. get this -- this country has run a deficit in 45 of the last 50 years. no household could get away with that, but then again, no household has the ability to print its own money either.

the national debt has grown to nearly $17 trillion as a result of these deficits piling on top of each other. if congress wanted to change that, well, they're the ones that authorize and appropriate literally every single cent the government spends. so go to town. but the debt limit, to quote president kennedy, does not and cannot control expenditures. no. all blocking the debt ceiling does is send and incredibly dangerous signal to the world that the u.s. may not deserve to be the single most trusted borrower on earth. here is what you are messing with if you mess with the debt ceiling. the u.s. issues debt by selling treasury bonds and the reason that people buy treasury bonds is that they are supposed to be literally the safest investment in the entire world. they are the golden promise on which the entire global financial system is built. if the u.s. owes you, it's going

to pay you back. the iou is iron. >> the boy or girl, man or woman who gets one of these new bonds for christmas has something that grows in value with the years. >> if you threaten that notion, you pull the cornerstone out from the global financial system. suddenly no one knows which other promises might not be kept. confidence is destroyed, and with no safe asset to depend on, markets will very likely panic. and we could all remember what that looks like. >> on the broadcast tonight, meltdown. the american financial system is rocked to its foundation as top wall street institutions topple under a mountain of debt. >> no matter what some irresponsible tea partiers claim, there is a very real possibility that breaching the debt ceiling will mean default. which means the u.s. rips up an iou. it doesn't pay someone back that we've borrowed money from. and that likely means higher

interest rates, a devaled dollar and a crash in the stock market, all because a small group of republicans who didn't know the difference between a household budget and that of the largest and most powerful economy on the planet managed to convince the world that america is no longer to be trusted. >> joining me joe wiesenthal, executive editor of business insider. stephanie kelton, associate professor and chair of the economics at the university of kansas city and scott lily, senior fellow of the center for american progress. he worked in congress for 31 years as a staffer largely on the appropriations committee. and my big question for all three of you is, just how screwed are we? and i want you to answer that right after we take this break. hey bonnie, can i hold her? yes. cup your hands together for me. rub it all the way up your hands. any exposed skin. and get the backs of your hands too. put some just around your neck. [ bell rings ] you're good to go. okay great thanks, here. can you hold him? [ bell rings ] [ female announcer ] by their second kid, every mom is an expert and more likely to choose luvs than first time moms. and new luvs with nightlock

offer our largest absorbent area ever. they lock away wetness better than huggies, even overnight. live, learn, and get luvs. earlier in the show we asked you how do we get out of this mess? we got a lot of answers posted to our facebook and twitter pages. jean morkin who says take away all the perks of the job. david says redistrict the entire

nation in every state using a longitude and latitude system that does not allow gerrymandering. pelosi and john boehner switch districts for a few months. i like that. we'll be right back.

we're back with joe, you follow with more care and attention to granular detail the minute fluctuations of the matter. what happens if we go over the debt ceiling? >> i don't think we would see a true default on day one. we probably do have some more cash that we can run. there probably would be some attempt to reprioritize payment, but it would be technically very difficult. the treasury pays out millions of automated payments. >> $2 million a day. >> there's no reprogramming that in the next few days. i'm sure we would see very severe stock market reaction.

it would be very fascinating to watch the treasury markets react to this because the risk becomes the u.s. is going to default on its debt. but in a period of panic, the traditional thing for all market participants is to raise for treasuries. >> treasuries aren't going to paid back. you just lent someone money they're not going to pay you back. what markets do when they panic, they rush to buy treasury bonds. >> i don't think anyone really knows the result, because the instinct for anyone is any time anything nervous happens is buy treasuries. but 245i6's the -- >> it's really crucial for folks to understand, we think of debt is bad, u.s. government debt is bad, we want to reduce the amount of debt. and yet, u.s. government debt, that's stuff, the treasuries we put out there, it's like the fuel for the entire global economy. everyone needs this thing that we in a domestic political

context talked about as a bad thing. >> well, yeah, you're absolutely right, the national debt is the equity that supports the entire global credit structure. so when you talk about messing with the national debt in that way, you're talking about potentially undermining the support for the entire global credit structure. >> and that's because treasury bonds, these simple things, basically a promise, the u.s. government will pay you back, that is the entire world has agreed to look at that thing as the most ironclad thing that exists in all of the world of all of finance, right? >> yeah, exactly the entire world has agreed that when we want to park our dollars in a very safe place that allows us to save those dollars and earn a bit of interest while doing that, that treasuries are the gain. this is one of the most important assets in the entire financial system in the world, right, these are the safest, the

most liquid, the most relied upon, they're used to diversify port folios to allow them to take more risk in other areas because they know they've got these safe things in their portfolios. >> the debt limit is like increasing your credit card limit. what's your reaction to that? >> well, you know, you started off the segment talking about how the government is not like a household. so my reaction to that is the government is not like a household. the federal government doesn't have a credit card that it needs to rely upon in order to finance its spending in the same way that you and i do. what really distinguishings the federal government from you, from me, from ordinary businesses and quite frankly from state and local governments is the fact that all of us are just merely users of the u.s. dollar. we're users of the currency. the federal government is the issuer of the currency. and this is something -- it

makes them and it's not a secret and it's not some crazy, you know, idea. this is something that the federal reserve writes regularly in their reports when they say the united states government is the sole manufacturer of the dollar. well, if you are the sole manufacturer of the dollar, that says you have a monopoly over the issuance of the currency. it can't come from anywhere else and you can't literally ever run out or be unable to make a payment or be forced into insolvency or any of those things that can happen to you and i and private businesses. >> scott, you worked on the hill for years and we have had in the last 30 years or so, there's been a number of essentially debt ceiling negotiations. and there's been in recurring line and i want to play a little clip from an interview i did with reed ribl last night, in which you hear republicans saying, this thing we're doing, we're trying to negotiate on the debt ceiling, this isn't some anomalous crazy thing we're doing, taking a listen to this. >> if you go back to 1978, it was house democrats who took the debt limit right to within eight

hours of when it was going to go up. this has happened a fair number of times. >> is 24 what we're seeing demands in exchange for raising the debt limit? >> i think you're right when you say we misnamed this, this is not about paying off the debt in time, it's about whether we are going to pay our bills once we have incurred them. the house republicans including mr.rible voted for an increase in the public debt of this fiscal year of $824 billion dollars up from where it is now. we couldn't add that to the debt limit. he's voted for the policy that he thinks is appropriate. but now he wants to play games with the debt limit and see if he can get a deal out of it. >> let me reiterate that just so folks understand what you just

said. when the house republican caucus voted unanimously for the latest iteration of the ryan budget. they were voting for a budget that would increase the amount of debt by almost a trillion dollars. >> that's correct. that's correct. so if we would just say, all right, you already voted to that, so let's raise the debt limit from $16.7 trillion to $17.7 trillion in line with your budget resolution, what's wrong with that? and the answer to that is well we want to use this, we want to threaten the economy and see how many how much we can get in exchange for concessions and the president is correct in saying he doesn't want to play that game. >> markets are not panicking right now. >> probably just a belief that they always do it in the end. if you ask people, in the end, 11th hour it always happens. >> they're not panicking because they don't think default wouldn't be a big deal. >> this is not a democrat or a liberal idea that a debt ceiling breach would not be a big deal. >> thanks to you at home for joining us this hour. think moby dick, think