White House warns default will damage US democracy
The White House warned 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 October 17.
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 October 17 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 October 17, 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, chairman 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."