Just when it looked as if relations between President Obama and congressional Republicans couldn’t get any worse, the two sides signaled today they are prepared to risk the first ever default on U.S. debt or another government shutdown to get their way on spending policy.
Barely two weeks after Obama and Congress narrowly averted taking the country over a fiscal cliff of massive tax increases and spending cuts, the president and House Republicans drew sharp lines in the sand over the terms for raising the debt ceiling again to enable the government to continue to pay its creditors and keep the government fully operating.
At a White House news conference, Obama said he wouldn’t allow the Republicans to hold the debt ceiling hostage to their demands for deeper cuts in Medicare and other entitlement programs, while House Republicans reportedly are seriously entertaining dramatic steps, including default or shutting down the government, to force Obama to cut spending by the end of March.
“The debt ceiling is not a question of authorizing more spending – it simply allows the country to pay for spending that Congress is already committed to . . . and we need to pay them,” Obama said. “Republicans in Congress have two choices here: They can act responsibly and pay America’s bills, or they can act irresponsibly and put America through another economic crisis. But they will not collect a ransom in exchange for not crashing the American economy.”
While economists and government officials repeatedly warned that the fiscal cliff posed serious threats to the U.S. economy, a first ever default on the governments $16.4 trillion public debt would be much worse – roiling international markets, driving up interest rates on all forms of borrowing, and inviting a major downgrade in the government’s sterling AAA rating. Standard & Poor’s took the U.S. credit rating down a notch in the summer of 2011 after the White House and Congress came within a day of default before reaching a compromise. The reaction from S&P, Moody’s and other rating agencies would be much more severe if the Treasury actually began defaulting on its obligations, which could occur as early as mid to late February, according to an analysis by the Bipartisan Policy Center.
Obama said repeatedly today that “We are not a deadbeat nation,” but if congressional Republicans block an extension of the government’s borrowing authority, “Social Security checks and veterans benefits will be delayed, we might not be able to pay our troops or honor our contracts with small business owners . . . markets would go haywire, interest rates would spike for anybody who borrows money. . . it would be a self-inflicted wound.”
The president was at turns conciliatory and defiant, at one point daring the Republicans to force another government shutdown like the two during the Clinton administration that backfired on the GOP when most Americans blamed the Republicans for the inconvenience and cost. Obama said that it would be short-sighted and a huge mistake for the Republicans if they tried that tactic again.
Obama said he was happy to talk to Republicans about ways to reduce the deficit.
“What I will not do,” he said, “is to have that negotiation with a gun at the head of the American people — the threat that unless we get our way, unless you gut Medicare or Medicaid, or, you know, otherwise slash things that the American people don’t believe should be slashed, that we’re going to threaten to wreck the entire economy. That is not how historically this has been done. That’s not how we’re going to do it this time.”