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Obama: Not raising debt limit "absurd", "financial disaster"

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.

"The American people do not support raising the debt ceiling without reducing government spending at the same time," he said. "The consequences of failing to increase the debt ceiling are real, but so too are the consequences of allowing our spending problem to go unresolved. Without meaningful action, the debt will continue to act as an anchor on our economy, costing American jobs and endangering our children's future."

In spite of the president's warnings -- and the potential economic consequences -- Republicans have said they're ready to use the threats of defaulting or a government shutdown to win significant spending cuts in the next round of negotiations. Ideally, the GOP wants dollar-for-dollar cuts in exchange for raising the debt limit.

"In another month from now, all these tea party people and others are going to be together and using that as the hammer to get that done, and I feel very good about that," Sen. Jim Inhofe, R-Okla., told CBSNews.com about the threat of defaulting.

While many Republicans are willing to use the threat of default as leverage, even more are reportedly willing to let the government shut down by failing to pass another "continuing resolution" to fund the government by March 27.

"I think it is possible that we would shut down the government to make sure President Obama understands that we're serious," Rep. Cathy McMorris Rodgers, R-Wash., the fourth ranking Republican in the House, told Politico. "We always talk about whether or not we're going to kick the can down the road. I think the mood is that we've come to the end of the road."

Mr. Obama said that if congressional Republicans really want to work towards a bipartisan agreement over deficit reduction, "there's a recipe for getting that done." However, the president said that House Republicans are more interested in shaping the government as they see fit.

"They have a particular vision about what government should and should not do," he said. "They are suspicious about government's commitments, for example, to make sure that seniors have decent health care as they get older. They have suspicions about Social Security. They have suspicions about whether the government should make sure kids in poverty are getting enough to eat."

That Republican viewpoint, he said, "was rejected by the American people when it was debated in the presidential campaign." Moreover, he pointed out that polls show Americans value spending on things like Medicare and education. "It makes a lot more sense for us to close, for example, corporate loopholes before we go to putting a bigger burden on students or seniors."

"If the House Republicans want to disagree with that and they want to shut down the government to see if they can get their way on it, that's their prerogative," Mr. Obama added. "It will damage our economy."

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