“If congressional Republicans refuse to pay America’s bills on time, Social Security checks and veterans benefits will be delayed. We might not be able to pay our troops,” Obama said, ratcheting up the rhetoric over the looming deadline to raise the $16.4 trillion debt ceiling.
“Investors around the world will ask if the United States is, in fact, a safe bet. Markets could go haywire,” he said. “It would be a self-inflicted wound on the economy. It would slow down our growth, might tip us into recession. And ironically it would probably increase our deficit.”
Obama added: “To even entertain this happening — of the United States of America not paying its bills — is irresponsible. It’s absurd.” He vowed that congressional Republicans “will not collect a ransom in exchange for not crashing the American economy. The financial well-being of the American people is not leverage to be used. The full faith and credit of the United States of America is not a bargaining chip.”
Obama said he still wanted to reach a compromise to stabilize borrowing over the long term but that willingness to negotiate does not extend to the debt ceiling, which covers obligations that Congress has already incurred.
“If we combine a balanced package of savings from health care and revenues from closing loopholes, we can solve the deficit issue,” Obama said. The American people “made a clear decision about the approach they prefer.... They don’t think it’s smart to protect endless corporate loopholes and tax breaks for the wealthiest Americans rather than rebuild our roads and our schools, invest in our workers’ skills, or help manufacturers bring jobs back to America.”
Obama said he was happy to talk to Republicans about ways to reduce the deficit. “What I will not do,” he said, “is to have that negotiation with a gun at the head of the American people — the threat that unless we get our way, unless you gut Medicare or Medicaid, or, you know, otherwise slash things that the American people don’t believe should be slashed, that we’re going to threaten to wreck the entire economy. That is not how historically this has been done. That’s not how we’re going to do it this time.”
Less than a week before Obama is inaugurated for a second term, the comments set up a collision course with Republicans, who insist that the debt-ceiling debate offers a crucial source of leverage to force spending cuts. Without a resolution, the U.S. and global economies face serious risks.
“The president and his allies need to get serious about spending, and the debt-limit debate is the perfect time for it,” Senate Minority Leader Mitch McConnell (R-Ky.) said in response to Obama’s remarks. “I do know that the most important issue confronting the future of our country is our deficit and debt.”
Obama also addressed imminent administration proposals to reduce gun violence, saying he would review on Monday proposals being assembled by Vice President Biden and would speak more about them later this week. He said the proposals would include measures he could take using executive authority, as well as provisions that would need Congress’s approval.
Obama did not directly say what the recommendations would include, but he hinted they would involve stronger background checks, restricting high-capacity ammunition magazines and at least a partial ban on assault weapons.
“Those of us who look at this problem have repeatedly said that responsible gun owners — people who have a gun for protection, for hunting, for sportsmanship — they don’t have anything to worry about,” Obama said.
“The issue here is not whether or not we believe in the Second Amendment,” he added. “The issue is: Are there some sensible steps that we can take to make sure that somebody like the individual in Newtown can’t walk into a school and gun down a bunch of children in a shockingly rapid fashion?”
Obama did not address immigration or climate change — two other issues on his second term agenda — in his remarks. He pushed back against concerns that he has hired only men for prominent second-term posts. And he rejected the notion that his lack of interest in socializing with Republicans makes it more difficult to get objectives accomplished.
“I like a good party,” he said at the news conference.
The debate over the debt limit is likely to be the most pressing issue in coming weeks. Obama and Congress also face other looming fiscal deadlines — including $1.2 trillion of deep spending cuts set to begin taking effect in March and a deadline later that month to pass a new resolution funding the government for the next year.
The government has already technically reached the debt limit, which is a legal cap on borrowing. But the Treasury Department is undertaking a series of “extraordinary measures,” which allow it to continue to finance operations for approximately two additional months. As a result, Congress and Obama are likely to have until late February or early March to raise the debt ceiling.
Should they fail, the government would quickly be at risk of an unprecedented default on the debt. Such an outcome would have consequences for global financial markets, where Treasury bonds play a critical role, as well for any one who receives payments from the government.
Obama says he won’t negotiate over the debt limit but would prefer to replace the deep spending cuts, known as sequestration, with a package of tax hikes and reforms to entitlement programs.
A growing number of Republicans say they see the debt-limit battle as a critical source of leverage and are warming to the idea of either allowing sequestration to take effect or shutting down the government — all in hopes of forcing federal spending reductions that they see as central to the nation’s fiscal future.
Obama will again address the nation next Monday, when inaugural festivities are held, and Feb. 12, in his State of the Union address. (Obama will formally be inaugurated Jan. 20, a Sunday.)