Michele Bachmann says Obama using "scare tactics" on debt ceiling

Rep. Michele Bachmann, R-Minn., speaks to supporters during her formal announcement to seek the 2012 Republican presidential nomination, Monday, June 27, 2011, in Waterloo, Iowa. Bachmann, who was born in Waterloo, will continue her announcement tour this week with stops in New Hampshire and South Carolina. AP Photo/Charlie Neibergall

UPDATED 8:56 a.m.

White House hopeful Michele Bachmann on Tuesday accused President Obama of using scare tactics to convince Congress to raise the statutory limit on how much money the United States can borrow to keep the government running.

"I think these are scare tactics by the Obama administration," the Minnesota Republican Representative said in an interview on CBS' "The Early Show," referring to assertions that financial markets would be face turmoil if Congress does not raise the $14.3 trillion debt ceiling by August 2.

"Until I see a legitimate, serious reduction in spending, I can't give my vote" to raise the debt ceiling, Bachmann said, adding "we will be right back at it again a year and a half from now in a worse position than we are today."

Bachmann noted that the debt ceiling would have to be increased by about $2.4 trillion to last through the end of next year.

She backed a controversial proposal from Sen. Pat Toomey, (R-Pa.) to give bondholders, including China, first dibs on the payments from the U.S. Treasury.

"The interest on the debt can easily be paid for and that would mean that we wouldn't default," she said.

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Toomey's proposal is popular among the conservative Tea Party wing of the Republican party, but has not been endorsed by the Republican leadership on Capitol Hill.

The Obama administration has warned against Toomey's proposal, as has Federal Reserve Board Chairman Ben Bernanke.

Earlier this month, Bernanke, who served as a top White House adviser to President George W. Bush before becoming Fed chief, said such a prioritization move would cause unnecessary concerns in the financial markets and would only buy a short amount of time.

"While debt-related payments might be met in this scenario, the fact that many other government payments would be delayed could still create serious concerns about the safety of Treasury securities among financial market participants," Bernanke said in a speech earlier this month.

Despite Bachmann's backing, the pay China first proposal is not expected to even garner a vote, much less become law.

Mr. Obama and Vice President Joe Biden met with both Senate Republican Leader Mitch McConnell and Senate Majority Leader Harry Reid at the White House on Monday to hammer out a deal.

Outwardly, little progress was made.

White House spokesman Jay Carney told reporters "compromise and an agreement will depend on each side being willing to accept some tough choices."

Bachmann is riding a wave of publicity after faring much better than expected in an Iowa Poll and officially launching her bid for the White House on Monday. In the poll released Saturday night by The Des Moines Register, Bachmann finished just behind former Massachusetts Governor Mitt Romney, garnering 22 percent of the vote compared to Romney's 23 percent.

  • Corbett Daly On Twitter»

    CBSNews.com Deputy Politics Editor Corbett B. Daly is based in Washington. He has worked at Reuters, Thomson Financial News and CBS MarketWatch.

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