Yahoo Finance’s Rick Newman joins the Live show to discuss the latest surrounding the debt ceiling showdown as Sen. Joe Manchin (D-WV) has pitched a deal with Republicans.

Video Transcript

JARED BLIKRE: Welcome back. A shaky economic outlook, a gloomy housing market, and a never ending debt ceiling debate. You'd be forgiven for thinking we're back here in 2011, but we're not. And the brinkmanship has returned. However, Democratic Senator Joe Manchin back in the headlines. He looks to be seeking a deal with the GOP over spending, which puts him at squarely the odds with the White House. Yahoo Finance's Rick Newman has the story. Rick.

RICK NEWMAN: Right, so we're going to be having another twist in this debt ceiling farce, is what I call it, just about every day for the next four or five months. And nothing is going to get resolved until we're right up to the deadline, which will probably come around mid-June or early June. But here's the twist du jour. Joe Manchin, the moderate from-- moderate Democrat from West Virginia, says, hey, here's how we can address the spending issues that Republicans are raising. Let's form a commission that is going to figure out what we should do about the reality that Social Security and Medicare eventually are going to run short of money.

Now, Republicans in the House are not going to buy this because they don't want a commission. I mean, when you really just want to put off an issue forever, in Washington, what you do is you form a commission. The way these work is Congress would then vote on the commission's finding. It would either be an up or down. You'd vote on all the committee's recommendations one way or the other. You can't modify them. We've seen this before. The Congress never adopts these measures.

So this is one of probably what are going to be dozens or hundreds of ideas for what to do about the debt ceiling impasse. But we're not going to get an increase in the borrowing limit, again, until the last minute because the small group of House Republicans for whom this is a do or die issue want to go to the mat on this when they think they'll have maximum leverage.

BRAD SMITH: Yeah, just in this morning as well, the Treasury Secretary Janet Yellen has addressed another letter here to Kevin McCarthy, House Speaker Kevin McCarthy, saying that because of the back and forth here that you were just laying out, Rick, that they're going to be unable to fully invest in the portion of the civil service retirement and disability fund required to pay beneficiaries, and that a debt issuance suspension period is going to begin today, Thursday, January 19, and going to last through June 5 of this year as well.

RICK NEWMAN: So what she's saying in plain English is, we have hit the federal borrowing limit. So the federal government now cannot borrow any more money in total. It can issue new debt as old debt matures. But the total amount of borrowing cannot go above where it is right now. So if the Treasury Department were not able to basically move money around and come up with some extra cash to pay bills, that means that some of the bills would-- some of the government's bills would simply go unpaid.

And we will get to that point. But we've got, let's call it four to five months here, where the Treasury can move money around. And assuming this does get resolved at the end, and the borrowing limit goes up, and there's no catastrophic consequences, then the Treasury will be able to replenish, kind of repair all these things. But for the meanwhile, we're going to-- for about four months, we're going to go through an exercise in madness, which is how close do we want to come to the US government can't pay its bills?

BRAD SMITH: All right, excellent insight and analysis. And hopefully we don't have to endure too much of that madness. Rick, thanks so much--

RICK NEWMAN: See you, guys.

BRAD SMITH: --for breaking that down for us.