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Republicans Slam Obama, Lew for Threats of Default

By    |   Tuesday, 08 October 2013 03:57 PM

As the United States gets closer to Oct. 17, when it is expected to hit its debt ceiling, Republican lawmakers say warnings by Democrats that the country will default on its debt unless Congress raises the ceiling are misleading, partisan, scaremongering tactics.

Both President Barack Obama and Treasury Secretary Jack Lew have warned in recent days that the U.S. is on the brink of its first-ever default, predicting dire consequences for the global economy if the debt ceiling is not lifted by Oct. 17.

GOP lawmakers point out, however, that the Treasury has adequate funds to pay the interest on its debts — even if the U.S. hits its debt ceiling — by deferring payments to certain government agencies.

According to a Fox News poll released Tuesday, almost three-fifths of Americans, or 58 percent, say they would vote against raising the debt ceiling.

Sixty-two percent of the 952 voters surveyed on Oct. 1-2 say that "major cuts in government spending" should be a condition of raising the borrowing limit.

Former House Speaker Newt Gingrich, who presided over the last two government shutdowns, in 1995 and 1996, told CNN on Tuesday:

"We will not default. It's not going to happen. It's irresponsible of Jack Lew, secretary of the Treasury, to suggest that he can't manage this when the Treasury has lots of assets. They can go for months with juggling things, so we're not going to default, that's not going to happen."

On Fox's “Hannity” show on Monday, Kentucky Sen. Rand Paul made a similar point:

"It's irresponsible for the president or Jack Lew or any of his men or women to go out on TV and say, ‘Oh, the U.S. might default.’

"We’ve never defaulted," Paul said. "We will never default, and there’s not even a reason to default, because we have plenty of revenue that comes in every month to pay our interest payment."

"There's always revenue coming into the Treasury, certainly enough revenue to pay interest," Michigan Rep. Justin Amash told National Journal. "Democrats have a different definition of 'default' than what we understand it to be. What I hear from them is, 'If you're not paying everything on time, that's a default.' And that's not the traditionally understood definition."

South Carolina Rep. Mick Mulvaney told National Journal:

"We're not going to default; there is no default. There's an [Office of Management and Budget] directive from the 1980s, the last time we got fairly close to not raising the debt ceiling, that clearly lays out the process by which the Treasury secretary prioritizes interest payments. Tim Geithner understood that, because the last weekend in July of 2011 he was in New York City telling the primary dealers that we were not going to default on our debt.

"If the president wants to lie to the public, I can't stop him," Mulvaney said.

On CNBC Monday, Texas Rep. Joe Barton explained how the U.S. would be able to manage its obligations by using the analogy of managing a household budget.

"Well, we have in my household budget some bills that have to be paid and some bills that are only paid partially," he said. "Paying interest on the debt has to be paid . . . Social Security payments have to be paid. I don’t think the secretary of energy’s travel expenses have to be paid 100 cents on the dollar," Barton said.

"We’ve got more than enough cash flow to pay interest on the public debt when it comes due, and the House Republicans have passed a prioritization bill," he said. "This talk about default by the U.S. Treasury is nonsense.

"The president can be smart or the president can be stupid. And I would assume, as smart as President Obama is, when push comes to shove, he’ll be smart. So, we are not going to default on the public debt. But that doesn’t mean that we have to pay every bill the day it comes in," Barton said.

Meanwhile, Iowa Rep. Steve King appeared on CNN, also arguing that talk of default was politically motivated.

"I don't think the credit of the United States is going to be collapsed. I think that all this talk about a default has been a lot of demagoguery, a lot of false demagoguery," King said.

Oklahoma Sen. Tom Coburn also criticized the argument that breaking the debt ceiling is akin to defaulting on the debt.

"I would dispel the rumor that's going around that you hear on every newscast, that if we don't raise the debt ceiling, we'll default on our debt. We won't," Coburn told CBS News on Monday. "We'll continue to pay our interest, we'll continue to redeem bonds, and we'll issue new bonds to replace those. So, it's not entirely accurate."

Wall Street, meanwhile, has continued to remain calm despite the warnings of default by Democrats, a position that appears to confirm the views of Republicans.

"If the market really believed there was a high probability of default, you would see a much more negative reaction," Donald Ellenberger, head of multisector strategies at Federated Investors, told The New York Times.

Bill Gross, head of the world's biggest bond fund, Pimco, also said last week that a government default would be unimaginable.
The odds of a default are "a million to one," as the Treasury Department will be able to take other measures to ensure it is servicing the country’s debt, Gross said.

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"We’ve got more than enough cash flow to pay interest on the public debt when it comes due, and the House Republicans have passed a prioritization bill," he said. "This talk about default by the U.S. Treasury is nonsense.
Tuesday, 08 October 2013 03:57 PM
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