Obama Scare on Debt Limit: 'The Whole World Will Have Problems,' But, 'There Will Be No Negotiations'
October 4, 2013 - 7:16 AM
By Susan Jones
(CNSNews.com) - Speaking in suburban Maryland on Thursday, President Obama continued to spread fear about the consequences of not raising the debt ceiling.
He noted that the U.S. has never before failed to raise the debt limit: "And you know, the United States is the center of the world economy, so if we screw up, everybody gets screwed up. The whole world will have problems, which is why, generally, nobody's ever thought to actually threaten not to pay our bills. It would be the height of irresponsibility."
But in the next breath, the president said he will not negotiate with Congress, even though everybody will get "screwed up" and "the whole world will have problems."
"And that's why I said this before. I'm going to repeat it. There will be no negotiations over this," Obama insisted.
Democrats worry that Republicans will attach spending cuts to any debt limit deal, just as they have insisted on Obamacare restrictions in any stopgap funding bill.
A few hours later, White House spokesman Jay Carney said Obama isn't trying to scare the American people when he talks about the dire consequences of not raising the debt limit, but he does think they should be worried.
On Wednesday, Obama told CNBC, "This time, I think Wall Street should be concerned."
Fox News reporter Ed Henry asked Carney, "Don't presidents in both parties usually, in times of crises, try to calm the public down? Why are you trying to get the public more scared?"
"What -- we're not. We're not -- just providing them with the basic facts," Carney replied.
"You want them to be more worried," Henry said.
"They should," Carney said. "Ed, you can go on -- I encourage you to test how it plays, if you go on the air and say, America, chill out; default's not a big deal. It is a big deal, and the American people need to know that."
Another reporter pressed Carney about Obama's apparent "goading" of the stock market, which ended up dropping below the 15,000 level on Thursday:
"He is -- he was simply stating a fact," Carney said. "In 2011, when Republicans flirted with default, there were negative consequences, many of them -- slowed down growth, slowed down job creation, a hit to the markets and a downgrading of our credit rating for the first time in the history of this country. That is the least of what would happen if we actually defaulted. It -- the president's obviously also carrying the responsibility of informing the American people of the truth, and that is the truth."
Obama sounded the alarm again in Rockville, Maryland, Thursday morning, where he spoke at a construction company that has federal contracts.
"The last time the House Republicans flirted with not raising the debt ceiling, back in 2011 -- some of you remember this -- our economy took a bad hit," the president said. Our country's credit rating was downgraded for the first time, just like you'd be downgraded if you didn't pay your mortgage. This time, they are threatening to actually force the United States to default on its obligations for the very first time in history."
Obama said as bad as the current government shutdown is, an economic shutdown that "results from default would be dramatically worse."
"In a government shutdown, Social Security checks still go out on time. In an economic shutdown, if we don't raise the debt ceiling, they don't go out on time. In a government shutdown, disability benefits still arrive on time. In an economic shutdown, they don't.
"In a government shutdown, millions of Americans -- not just federal workers -- everybody faces real economic hardship.
"In an economic shutdown, falling pensions and home values and rising interest rates on things like mortgages and student loans, all those things risk putting us back into a bad recession, which will affect this company and those workers and all of you."
Obama said that's not his analysis -- "every economist out there is saying the same thing."
"We've never done it before. And you know, the United States is the center of the world economy, so if -- if we screw up, everybody gets screwed up. The whole world will have problems, which is why, generally, nobody's ever thought to actually threaten not to pay our bills. It would be the height of irresponsibility.
"And that's why I said this before. I'm going to repeat it. There will be no negotiations over this."(Cheers, applause.)
Congress does not have to raise the debt ceiling to avoid default on the debt. But if the debt ceiling is not raised, the federal government will have to make difficult choices about how to spend the tax money it collects.
To avoid default, the government must continue interest payments to bondholders, and because it takes in much more tax revenue than it pays out in interest, "there is plenty of leeway to service the debt," said Dan Mitchell of the Cato Institute, a former Heritage fellow. (See Heritage blog)
"The government can simply prioritize interest payments to bondholders and hold back on payments to others to avoid a default on the debt."