President Obama issues debt-ceiling warning

President Obama issues debt-ceiling warning

President Obama: Won’t ‘negotiate’ under threat.     

Taken from a story written by Ted Barrett, Deirdre Walsh and Tom Cohen.

     President Barack Obama sounded a stern warning Tuesday about the consequences to the nation if Congress fails to raise the debt ceiling. He also urged members of Congress to end the partial government shutdown.

“We’re not going to pay ransom for” America paying its bills, he told reporters, placing the blame on the crisis squarely on House Republicans. “Let’s lift these threats from our families and our businesses and let’s get down to work.”

If Congress doesn’t raise the debt ceiling, “every American could see their 401Ks and home values fall,” and the country would see a “very significant risk” of a deep recession.

Failing to raise the debt ceiling “would be dramatically worse” than a government shutdown, he said.

Earlier, there was a high-level phone call between President Obama and House Speaker John Boehner, but no immediate sign of progress on reopening the government a week into a partial shutdown or reaching a deal to avoid the first-ever U.S. default next week.

Boehner demanded that President Obama and Democrats negotiate with Republicans on steps needed to end the shutdown that began on Oct. 1 and raise the nation’s debt ceiling before the deadline for default on Oct. 17.

“Americans expect us to work out our differences, but refusing to negotiate is an untenable position,” Boehner said, adding that President Obama and Senate Majority Leader Harry Reid are “putting our country on a pretty dangerous path” by rejecting GOP calls for talks.

President Obama has refused to negotiate on the shutdown or debt ceiling, calling the need to fund the government and increase its borrowing power constitutional responsibilities that must be free of partisan politics.

A White House statement said President Obama “is willing to negotiate with Republicans — after the threat of government shutdown and default have been removed — over policies that Republicans think would strengthen the country.”

President Obama also urged Boehner to allow a vote in the House on the Senate-Passed measure to reopen the federal government, and called for quick action on raising the debt limit, the White House statement said.

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In both cases, Obama said the House should pass “clean” proposals that don’t have partisan amendments pushing GOP priorities, according to the statement.

Economists warn that failure to increase the amount the government can borrow to pay its bills would mean a spike in interest rates that would ripple through the U.S. economy, as well as other ramifications.

The shutdown that began when Congress failed to authorize government spending for the new fiscal year that started October 1 entered its second week, while the October 17 deadline to raise the debt ceiling looms ahead for political leaders locked in partisan stalemate.

Boehner and conservative Republicans want to leverage the situation to wring concessions on deficit reduction and Obama’s signature health care reforms from the White House and Democrats.

So far, the president and Senate Democrats have rejected the GOP efforts, causing the impasse that is escalating public anger against all the parties involved, especially Republicans, according to recent polls.

To keep up pressure on President Obama and Democrats, House Republicans will propose a measure to set up negotiations on the debt limit and other fiscal issues, as well as one to guarantee paychecks for essential government workers are issued on time during the shutdown, GOP sources said Tuesday.

Rep. Tom Cole of Oklahoma, a GOP leader in the House, said a negotiating committee with Democrats and Republicans from both parties could pass a short-term extension of the debt ceiling while doing its work.

“I suspect we can work out some mechanism to raise the debt ceiling while negotiations are under way but we’re not going to simply raise it without talking about the deficit,” Cole said. It was unclear if his description would satisfy President Obama’s insistence that the debt ceiling increase must be separate from political negotiations.”

Democratic Sen. Chuck Schumer of New York called the GOP proposals the latest in a series of “new gimmicks” that avoid the need to reopen the government and raise the debt ceiling before broader negotiations.

“We have a simple plea with them: Let’s open up the government, pay our debts, and then we’ll discuss anything they want in a forum in which they want to discuss it,” Schumer said. “It’s more of the same right now.”

Boehner didn’t mention the GOP proposals at a morning news conference, but he told reporters he wanted “conversation” with President Obama and Democrats “to resolve our differences.” Asked about any preconditions for such talks, Boehner said he wasn’t “drawing any lines in the sand.”

In the Senate, Reid could file a proposal as soon as Tuesday to raise the debt ceiling without addressing any deficit reduction issues demanded by Republicans, a Senate Democratic leadership aide told CNN.

Obama reiterated Monday that he will not negotiate with Congress while the country was under threat of a possible debt default.

“We’re not going to establish that pattern,” President Obama said, adding that “we’re not going to negotiate under the threat of a prolonged shutdown until Republicans get 100 percent of what they want” or under the threat of “economic catastrophe.”

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At the same time, the White House signaled a willingness to accept a short debt limit increase that would allow time for broader negotiations.

White House spokesman Jay Carney told reporters that “I’m not ruling out” a debt ceiling increase of any particular length of time, adding he believed a longer one was better because it would provide certainty after what Obama characterized as “manufactured crises” over similar brinkmanship in recent years.

“Our position is only that it ought not to be a political football, because it’s a dangerous political football,” Carney said. “And you know, fumbling that football can cost you a lot more than seven points. It can tank the economy.”

Economists warn of dire fiscal impacts from failing to raise what is called the debt ceiling, such as a reduced U.S. credit rating that would spike borrowing costs. The economic blow and questions about America’s fiscal fidelity could bring a global slowdown, Obama has warned.

At issue is how to reach an agreement to fund the government in the newly started fiscal year and raise the $16.7 trillion debt limit.

A CNN survey shows that 18 Republicans would join all 200 House Democrats in supporting the plan, exceeding the 217 majority needed for it to pass. At the same time, the CNN survey showed that fewer Republicans were willing to join Democrats in a procedural move called a discharge petition that would force Boehner to hold a vote.

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In a new national poll released Monday, most respondents said the government shutdown was causing a crisis or major problems for the country.