Tag Archives: faith

Obama Says Debt Default May ‘Unravel’ Global Financial System

15 May

Source: Bloomberg, May 15, 2011.
Possible! When “financial stuff” gets serious. I have written about this here here and here. In short, the government needs to reduce how much money it spends while stimulating the Economy to do something.

By Roger Runningen
May 15 (Bloomberg) — President Barack Obama said failure to raise the U.S. debt ceiling by early August might disrupt the global financial system and plunge the nation into another recession.

If investors “around the world thought the full faith and credit of the U.S. was not being backed up, if they thought we might renege on our IOUs, it could unravel the entire financial system,” Obama said on a broadcast taped for today’s “Face the Nation” program on CBS. “We could have a worse recession than we’ve already had.”

Obama is reaching out to Republican and Democrat lawmakers to win approval of an increase in the debt ceiling. The government projected this month that the $14.3 trillion debt limit will be reached tomorrow. Treasury Secretary Timothy Geithner says that while he can juggle accounts for a time, he will run out of options for avoiding default by early August.

Republicans including House Speaker John Boehner of Ohio and Senate Minority Leader Mitch McConnell of Kentucky are seeking trillions of dollars of spending cuts and no tax increases in exchange for supporting a higher debt limit. Obama on April 13 proposed a long-term deficit-reduction package of about $4 trillion over 12 years. It includes $2 trillion in spending cuts, $1 trillion in tax increases and $1 trillion in reduced interest payments.

Obama held talks with Senate Democrats and Republicans May 11 and May 12, and appointed Vice President Joe Biden to lead negotiations with congressional leaders to try to strike a deal on reducing debt and deficits.

“I’ve said, ‘Get them in a room, hammer out a deal, and make sure that we don’t even get close’” to defaulting on the nation’s debt, Obama said.

Debt reduction must be “balanced” and include tax increases, Obama said.

“Are we going to make sure no single group — not seniors, not poor folks, not any single group — is carrying the whole burden? Let’s make sure the burden is shared,” Obama said on the CBS program, which was taped on May 11 in Washington for broadcast today.

Obama said he would resist cuts in such areas as medical research, infrastructure such as roads, bridges or railroads, or college loans for needy students.

“My hope is that Congress is going to say ‘This is so serious, we can’t play politics with it,’” Obama said. “Have faith that usually after trying everything else, we end up doing the right thing.”

–With assistance from James Rowley and Laura Litvan in Washington. Editors: Andrea Snyder, Leslie Hoffecker

To contact the reporters on this story: Roger Runningen in Washington at rrunningen@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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