A fight over the budget loomed on Sunday as a top aide to President Barack Obama warned of catastrophic consequences if Republicans follow through on threats to reject an increase in the nation’s borrowing limit.
Republicans, who will take control of the House of Representatives this week, are demanding spending cuts to curb the $1.3 trillion budget deficit and several have said they would oppose a higher debt ceiling if Obama does not agree to a range of painful cuts.
White House economic adviser Austan Goolsbee accused Republicans of “playing chicken” with the nation’s financial credibility.
“This is not a game. You know, the debt ceiling … is not something to toy with,” Goolsbee told the ABC News program “This Week.” “If we hit the debt ceiling, that’s … essentially defaulting on our obligations, which is totally unprecedented in American history.”
“The impact on the economy would be catastrophic. I mean, that would be a worse financial economic crisis than anything we saw in 2008,” he said.
Without a vote by Congress to raise the limit on government borrowing, the Treasury Department could bump up against the current $14.3 trillion debt limit. Treasury has estimated the limit could be reached during the first or second quarter of this year.
Republican Rep. Michele Bachmann of Minnesota told CBS’ “Face the Nation” Republicans were not looking to shut the government down but they do want to cut spending so the debt limit does not have to be raised “continually.”
“At this point, I am not in favor of raising the debt ceiling,” Bachmann said. “Congress has had a big party the last two years. They couldn’t spend enough money and now they’re standing back, folding their arms … taunting us about how are you going to go ahead and solve this big spending crisis?”
“To not raise the debt ceiling could be a default of the United States on bond and Treasury obligations,” said Republican Senator Lindsey Graham of South Carolina. “That would be very bad for the position of the United States in the world at large,” Graham said. “But this is an opportunity to make sure the government is changing its spending ways.”
Graham, speaking on NBC’s “Meet the Press,” said he would not vote to raise the debt ceiling unless spending is cut back to 2008 levels.
“The last election was about change, change that really will make us something other than Greece,” he said.
INVESTMENT FOR GROWTH
Goolsbee, chairman of the White House Council of Economic Advisers, said Obama is willing to make difficult choices on spending cuts when he unveils his budget next month but also said it was important not to “skimp” on investments like education.
“We are going to have to make, in the medium run, a series of tough choices, and the president’s not afraid to do that, and I think you will see in his budget that he’s willing to,” Goolsbee said.
Obama plans to unveil his annual budget proposal in mid-February. After their triumphs in November congressional elections, Republicans have vowed to roll back federal spending to 2008 levels, with exceptions for the elderly, U.S. troops and veterans.