President Barack Obama warned that unless Republicanlawmakers agree to raise the US sovereign debt ceiling the country could face anew economic crisis and global markets could go “haywire”.
“To even entertain the idea of this happening, of the UnitedStates of America not paying its bills, it is irresponsible, it is absurd,”Obama said, repeating his demand for a debt limit rise.
“We are not a deadbeat nation,” the president said in hisfinal press conference of his first White House term, pinning responsibilityfor the government’s deficit spending on Congress, which passes spending bills.
“While I’m willing to compromise and find common ground overhow to reduce our deficits, America cannot afford another debate with thisCongress about whether or not they should pay the bills they’ve already rackedup.”
Congressional refusal to raise the debt limit beyond itscurrent level of $16.4 trillion could delay key government payments.
Obama warned that this could include Social Security checksand veterans’ benefits, paychecks to troops, air traffic controllers, and thehonoring of contracts with small businesses.
“Investors around the world will ask if the United States ofAmerica is in fact a safe bet,” he added.
“Markets could go haywire, interest rates would spike foranybody who borrows money... It would be a self-inflicted wound on theeconomy.”
The United States ran up against its current debt limit atthe end of 2012, but the government is using “extraordinary measures” to extendthe limit until late February.
Obama said any potential solution lies with the RepublicanHouse leadership, some of whom have demanded that any rise in the debt ceilingbe matched dollar-for-dollar by deep government spending cuts.
“The full faith and credit of the United States of Americais not a bargaining chip,” he said.
Lawmakers can “act responsibly, and pay America’s bills, orthey can act irresponsibly and put America through another economic crisis,”Obama said.
“But they will not collect a ransom in exchange for notcrashing the American economy.”
Republicans reacted swiftly, essentially ignoring Obama’sdemand to de-couple the spending debate from the debt ceiling and giving everyindication that the face-off will continue.
“The president and his allies need to get serious aboutspending, and the debt-limit debate is the perfect time for it,” SenateMinority Leader Mitch McConnell said.
He added that fellow Republicans look forward to workingwith Obama “to do something about this huge, huge problem.”
House Speaker John Boehner acknowledged that theconsequences of failing to raise the debt limit are real, “but so too are theconsequences of allowing our spending problem to go unresolved.”
Boehner said the Republican-controlled House ofRepresentatives will “do its job” by passing legislation to control spendingand meets US debt obligations and would insist the Democratic majority in theSenate do the same.
Obama also warned off the renegade House Republicans who arereportedly considering letting the US government go into default and actuallyshut down temporarily unless Obama agrees to dramatic federal spending cuts.
"I think that would be a mistake (and) would beprofoundly damaging to our economy," he said.
"The last time Republicans in Congress even flirtedwith this idea, our AAA credit rating was downgraded for the first time in ourhistory," said Obama, referring to the bitter political battle over theceiling in 2011.
A potentially bigger fiscal showdown is taking shape onceagain, with battles over the debt ceiling, the national budget and the fate ofmandated spending cuts all converge around the same time: late February.
Republicans are smarting after accepting a year-end deal toavert the so-called fiscal cliff that imposed a tax hike on the richestAmericans -- a major concession for conservatives.
But the measure delayed for two months any handling of the$100 billion in automatic spending cuts set to hit in 2013 and that hadthreatened to drive America back into recession.
