White House: Default will damage democracy

Washington - The White House warned on Monday that the idea of a self-inflicted national default was "a terrible" scenario that would damage America's democracy, credit and global standing for years.

Top officials somberly warned there was no other plan than for Republicans to raise the $16.7 trillion US borrowing limit by 17 October.

They pushed back strongly a day after House Speaker John Boehner warned he would not raise the debt ceiling unless President Barack Obama made significant political concessions.

A refusal by Congress to raise the debt ceiling would trigger such dire economic consequences that many observers believe top leaders would blink before it came to pass.

But the nightmare scenario is growing in credibility, with Obama and House Republicans estranged over the current government shutdown and with the 17 October deadline approaching.

"I don't think there were many people who weren't disappointed in the Speaker's comments yesterday," said Gene Sperling, Director of the National Economic Council.

Sperling warned that Obama could not allow the House of Representatives to hold him hostage over raising the debt limit because it would set a dire precedent for future presidents.

"The president has made clear the era of threatening default has to be over," Sperling said at a breakfast hosted by the Politico news organization.

"If we sanction that as a regular process, that will do great harm to our democracy, great harm to our economy, great harm to the full faith and credit of the United States," he said, adding that a debt default would be "unthinkable".

Obama is refusing to negotiate with Boehner on raising the debt ceiling, saying Congress has a duty to pay bills already run up by lawmakers.

If the government loses its borrowing authority on 17 October, it will begin to default on its debts for the first time in history.

Many observers believe the US economy could be thrown back into a disastrous recession, that contagion could spread across the globe and that stock markets would go into meltdown.

Boehner told ABC News on Sunday that his Republican-controlled House would not raise the US debt ceiling without concessions from the White House.

"We're not going to pass a clean debt limit increase," Boehner said.

"I told the president, there's no way we're going to pass one. The votes are not in the House to pass a clean debt limit. And the president is risking default by not having a conversation with us."

But Jason Furman, chairperson of the president's Council of Economic Advisors, warned "the only plan here" was for Congress to raise the debt ceiling.

He said the consequence of default were "too terrible a thing to even talk about.

"We've never actually tested it, we don't know what happens."

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Neil White 2013/10/07 08:35:18 PM
But how long can you keep on printing money?
Stephen AndKathy Whiteley 2013/10/07 09:01:27 PM
There is no democracy in the US. As to backing off, the onus is on the Government. Who else?
Anti-corruption 2013/10/07 09:18:51 PM
Give me JZ anytime
Michael Moolman 2013/10/08 01:32:45 AM
The interesting thing about this kind of showdown is all the diverse commentry and predictions produced. The 17th October is a key day and we'll know soon enough who's predicited outcome was most accurate. Kind of like the hysteria around the time of the 31st December 1999; on the 1st January 2000 all the clocks just carried on ticking away and it's now thirteen years later.
Yolanda Du Plessis Bouwer 2013/10/08 05:01:37 AM
ThOse who have little are going to have even less or nothing. It is most definitely going to affect the rest of the world.
AllcoveredinNinjas 2013/10/08 07:57:58 AM
Here's what the WH is not telling you . They can easily pay for their debt but unless the budget is passed they will technically default . This puts the Facebook president in a 3 choice pickle ,either he assumes dictatorial powers (again) and executively raises the debt limit or he negotiates with republicans to curb spending and delay obamacare ,his last option is to let the default occur ergo the grandstanding , blaming and name calling .
Michel Konings 2013/10/08 07:59:01 AM
How can one spend so much money what is not yet earned? There is a shortfall of 1.6 trillion dollars!
Raymon McNelly 2013/10/08 12:19:26 PM
Obama and his regime is bad for democracy.