US markets hold steady as fiscal cliff nears

>> the business community is closely tracking all of this. the progress or lack of progress on the fiscal cliff talks and also wondering who is going to be the next treasury secretary. joining me steve rattner, wall street finance year, former head of president obama 's auto task force . thanks for joining us, steve . first of all, what about the scenario that oh let's just let them go over the cliff and won't matter and the markets will view it as a nonevent. what do you think some.

>> certainly going to matter. there's no question it's going to matter. it's going to matter to the markets. we don't know how much. this is an unprecedented situation, at least in my lifetime. we've had crises and debt ceilings and all that, but going over a cliff like this is a new one. the markets would be volatile, extremely -- a lot of downward pressure on them. and then the question would be how do businesses and consumers behave and quickly do they pull back? everyone knows the immediate impact from the government coming back and spending wouldn't be that great. the question then is how do businesses and consumers react? i don't think it will be a pretty sight.

>> what about the debt ceiling? there was a suggestion? geithner's opening bid that they do a permanent fix and give the president the operative control over whether or not the debt ceiling is raised. there's a lot of confusion out there about what the debt ceiling really is. opponents to this tend to argue this will increase government spending when you and i know it's just to raise the limit for what congress has already appropriated to be spent.

>> in a perfect world a debt ceiling is a stupid way to run a railroad. congress should appropriate what it wants to appropriate. the white house and the executive branches should go ahead and spend it and that's the way you should run it. we're not in a perfect world and we have the debt ceiling. i don't see any possibility that the republicans are going to permanently give up the right to weigh in on the debt ceiling from time to time. on the other hand, i don't see any possibility that the white house would agree to deal now that doesn't get past this february, march deadline on the debt ceiling we face. it makes no sense at all to go past the fiscal cliff, maybe solve that problem, and then run right into a debt ceiling discussion. so i think what the white house is signaling is that at a minimum, any deficit package has to include this immediate february and march debt ceiling that we're going to hit.

>> is jack lew the current chief of staff and former budget director the top candidate to be treasury? what is your best guess?

>> he appears to be the frontrunner from everything you see and read and hear and he is a -- i've known him a long time. he's an accomplished guy. he knows these issues perfectly. he has worked in the financial community and has a sense of that and vice versa . and so i think he would be a it terrific choice.

>> we should say there are a couple other people who have been rumored to being vetted. roger altman , former treasury official, larry fink, be erskine bowles . this what is alan simpson , erskine bowles ' partner in the deficit commission, had to say about that possibility last week on the show.

>> he said he would be very pleased to do that. he shared that with me personally, as long as they move the treasury department to north carolina , to charlotte. i don't think --

>> he's worked so hard on this. you don't think he could be persuaded?

>> never. because he wouldn't want to serve in a dysfunctional government.

>> and no argument that it is dysfunctional. one of the key players here who is leaving government was mentioning -- i was asking, why is jack lew so disliked, let's say, by the republicans with whom he negotiates? and the answer that i was given was that he knows the budget. he knows the baseline and the baseline is really what mandates how much in cuts really will be cut and that he ran circles around the house negotiators last summer durings the super committee because he knew what he was talking about. which, you know, arguably that's a big difference. you can say there are $4 trillion in cuts but $4 trillion can become only $800 billion if you have the baseline wrong.

>> oh, you can do anything you want with these numbers and i think it will be important as we go through this process to be sure that the press and the experts and everybody holds both sides accountable on the numbers and makes sure whatever deficit reduction is being portrayed as consisting of, is, in fact, what it actually consists of. and the fact is, what worries me almost as much as going over the so-called fiscal cliff, is the possibility that we have an inadequate solution. some form of kick the can down the road. we need $4 trillion of deficit reduction over the next ten years to stop the rate of debt to gdp from continuing to grow, at least stabilize our financial problem. we're not going to balance the budget, not going to start paying down the debt, but stop the hemorrhaging if we get $4 trillion. i worry because this is a fractious issue, that we won't get the $4 trillion and that's as i said, scares me almost as much as going over the cliff itself.

>> steve rattner, thank you very much.

>> thank you.

>> good to see you.

>> nice to see you.