While Republican lawmakers toy around with holding the debt ceiling hostage, Federal Reserve Chairman Ben Bernanke warned on Monday it’s “very, very important” to raise the nation’s borrowing limit.
Echoing President Obama’s earlier remarks advising against the “deadbeat nation” stance, Bernanke stressed the need for the country to raise the debt limit – simply as a means to pay its existing bills.
Raising it “doesn’t create new deficits, it doesn’t create new spending,” he explained during an event at the University of Michigan, throwing cold water on common GOP talking points. Bernanke warned it’s “very, very important that Congress take necessary action to raise the debt ceiling.”
Bernake tried to create a bigger distinction between raising the limit and authorizing new government spending; he compared the GOP threats of defaulting or even shutting down the government as a means to get dramatic spending cuts to a family trying to save money by not paying its credit card bill—basically, it’s not an effective tactic.
In a press conference, President Obama made it clear Republicans have no choice but to raise the debt ceiling.
“While I’m willing to compromise and find common ground over how to reduce our deficit, America cannot afford another debate with this Congress over how to pay the bills they’ve already racked up,” Obama said. “To even entertain the idea of this happening, of America not paying its bills, is irresponsible. It’s absurd.”
Many economists argue America’s failure to pay the bills could send the already shaky economy back into the downward spiral of a recession and a credit downgrade.
In a letter to congressional leaders on Monday, Treasury Secretary Timothy Geithner estimated the U.S. could max out on its $16.4 trillion borrowing limit as early mid-February, sooner than expected.