* Default would be “insane,” Obama says
* U.S. creditworthiness at stake, president says
* Need to “put a stop to this”
By Mark Felsenthal
WASHINGTON, Oct 8 (Reuters) – 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 Oct. 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.
