Republicans: Obama scaremongering

Senate Republicans blasted President Obama on Wednesday for making “unproductive and misguided” warnings about a default on U.S. debt.

In a letter sent to the president, the Republicans argued that it was not the debt-limit standoff rattling markets but rather the president’s repeated warnings of disaster if the borrowing cap is not raised.

“While some may perceive talk of default as just poorly timed political
rhetoric, it is possible that our financial markets could continue to
take such comments at face value,” they wrote.

The letter was signed by every Republican on the Senate Finance Committee. Treasury Secretary Jack Lew is scheduled to testify before that panel on the debt limit Thursday.

Leading voices in the economic, financial and business communities have urged Congress to raise the $16.7 trillion debt ceiling and aired concerns about the damage that could result if the cap is not raised in time.

But the GOP lawmakers contend that any claims from the administration that the U.S. would default “are not only misleading in our view, but they threaten to destabilize financial markets and could raise borrowing costs for families and small business.”

{mosads}The Republicans insisted that the U.S. “cannot and will not” default on its debt but did not state that raising the debt ceiling was inevitable. Some Republicans have suggested that the government could avoid a default without raising the borrowing cap, contending that the government brings in enough revenue to continue paying interest on the Treasury’s debt.

The Treasury Department has found ample support from financial and economic experts who contend that, even if the government could remain current on interest payments if the debt limit were not raised, missing other government payments would still be chaotic and damage the U.S.’s reputation as a leading creditor in the global markets.

For his part, the president has repeatedly issued warnings about the damages of a debt limit standoff and has told Wall Street they should be concerned. On Tuesday, he told the press that a default would pose “a significant risk of a very deep recession. … This is real.”

Republicans say the fiscal debate should serve as a time to “make a significant down payment” on the nation’s long-term debt trajectory.

The president has said he is willing to talk debt and deficit with Republicans but not before they pass “clean” legislation reopening the government and raising the debt limit.