President Obama today shot down Republican threats to let the federal government default on its loans, saying, "To even entertain the idea of this happening, of the United States of America not paying its bills, is irresponsible. It's absurd."
"We've got to pay our bills," Mr. Obama said in a White House news conference. He reiterated that while he is willing to compromise over plans for deficit reduction, he will not accept using the debt limit as a bargaining chip.
"They will not collect a ransom in exchange for not crashing the American economy," he said of Republicans. "The full faith and credit of the United States of America is not a bargaining chip."
Within a matter of weeks, Washington is likely to be embroiled in debate over three fiscal issues: The Treasury Department is expected to hit its $16.4 trillion debt limit by mid-February or early March, the $1.2 trillion in "sequester" cuts are set to go into effect on March 1, and the "continuing resolution" that funds the federal government is set to expire on March 27.
The risk of failing to address any of these issues is high, but failing to raise the debt limit poses the greatest threat: By failing to do so, Congress would risk letting the government default on its loans, which economists say would have disastrous consequences.
Mr. Obama stressed today that raising the debt ceiling would not authorize new spending.
"It simply allows the county to pay for spending that Congress has already committed to," he said. "These are bills that have already been racked up... You don't go out to dinner, then eat all you want and then leave without paying the check."
The president quoted House Speaker John Boehner on the issue, who last year said letting the government default would be "a financial disaster not only for us, but for the worldwide economy."
The president ran through a list of the economic consequences of default, noting, "Social Security checks and veterans' benefits will be delayed. We might not be able to pay our troops or honor or contracts with small business owners. Food inspectors, air traffic controllers, specialists who track down loose nuclear materials wouldn't get their paychecks. Investors around the world will ask if the United States of America is, in fact, a safe bet. Markets could go haywire, interest rates would spike for anybody who borrows money, every homeowner with a mortgage, every student with a college loan... It would be a self-inflicted wound on the economy, it would slow down our growth might tip us into recession, and ironically, might increase our deficit."
In response to the president's news conference today, Boehner said the House will "do its job" and pass legislation to keep the government running and pay its bills -- along with cutting spending.