Bernanke: Debt limit not a ‘bargaining chip’

{mosads}Given that the government has never failed to raise the debt limit in order to continue meeting previous obligations, the central bank chair said he didn’t know exactly what would happen if the limit was not increased. However, he said, he was confident the consequences would be bad for the American economy.

“At a minimum, the cost would be an increase in interest rates,” he said. “The worst outcome would be one in which the financial system is again destabilized.”

The political battle over raising the debt limit has raged for weeks. Democrats and the White House have argued the limit needs to be raised promptly and have painted attempts to pair an increase with other measures as irresponsible. Meanwhile, Republicans say they will not raise the ceiling unless it is coupled with major spending concessions.

Earlier in the week, the conservative Republican Study Committee circulated a letter among House members that demands cutting the federal deficit in half, capping spending and approving a balanced-budget amendment as conditions for supporting a debt-limit boost.