Evoking financial chaos and economic hardship, President Barack Obama on Tuesday warned Americans they would be hurt if Congress lets the United States default on its debt, and cautioned against listening to anyone saying the effects are exaggerated.
At a hastily scheduled news conference at the White House, Obama gave his strongest warning to date about the risks if Congress fails to raise the U.S. debt ceiling before an October 17 deadline.
“A decision to actually go through with it, to actually permit default – according to many CEOs and economists – would be, and I’m quoting here, ‘Insane, catastrophic, chaos.’ These are some of the more polite words,” he said.
“Warren Buffet likened default to a nuclear bomb, a weapon too horrible to use,” the president said, citing the widely respected businessman.
Obama, criticized by Republicans for his unwillingness to negotiate over the debt ceiling, also said that beyond the immediate harm, there were larger issues at stake for future presidents and for democracy.
“This is not just for me. It’s also for my successors in office, whatever party they’re from. They shouldn’t have to pay a ransom either for Congress doing its basic job. We gotta put a stop to it,” he said.
Republicans, keen to use their leverage to force Obama to cut spending or curtail the reach of the Affordable Care Act health law, have suggested that the ill effects of a debt default are overstated. Some lawmakers have proposed plans for prioritizing U.S. debt payments, paying some creditors first and putting off other payments if cash flow into government coffers was insufficient.
Speaking to a global audience through the media on Tuesday, the president sought to shoot down the notion that the impact of a debt default would be nothing more than a glancing blow.
“This is the creditworthiness of the United States that we’re talking about,” he said. “This is our word. This is our good name. This is real.”
Obama acknowledged that he was at a disadvantage in the public relations battle because asking lawmakers to raise the debt ceiling “is a lousy name” that voters can come to equate with authorizing more debt.
“It is not raising our debt,” he said. “This does not add a dime to our debt.”
‘RISK OF A VERY DEEP RECESSION’
He went on to warn against listening to “people out there who don’t believe that default is a real thing,” and painted an unsettling picture of the consequences of debt default. Americans would see their retirement savings and home values plunge and interest rates on home mortgages and student loans would soar, he said.
“And there would be a significant risk of a very deep recession at a time when we’re still climbing our way out of the worst recession in our lifetimes,” Obama said.
The president’s pitch on Tuesday seemed aimed at getting Americans to identify with the bind in which Republicans have put him, and the nation, by seeking political concessions while holding out the possibility of a default if he fails to comply.
“You don’t get a chance to call your bank and say, ‘I’m not going to pay my mortgage this month unless you throw in a new car and an Xbox.'” he said.
The U.S. government is in the eighth day of a partial shutdown because House of Representatives Republicans wanted to make delaying or defunding Obama’s signature healthcare law a condition for funding government operations, which the president and his fellow Democrats in the Senate refused to accept.
With the shutdown dragging on, Obama, who canceled a trip to Asia to focus on the domestic crisis, appeared in public for the third day in a row to urge congressional Republicans to allow votes to re-open government and raise the nation’s borrowing limit.
House Speaker John Boehner has said he will not allow a vote on raising the $16.7 trillion debt limit without conditions.
But Obama, stung by down-to-the-wire negotiations over raising the debt limit in 2011 that led to a damaging downgrade of the U.S. credit rating, has refused to bargain this time, saying that maintaining the nation’s reputation as a reliable debtor should not be a concession in political debate.
“I’m not budging when it comes to the full faith and credit of the United States,” he repeated on Tuesday.