White House rules out debt veto
Republicans threaten to take debt
limit fight to the brink despite warnings of economic 'catastrophe'
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House minority leader
Nancy Pelosi speaks during a press conference on Thursday in Washington
DC. Photograph: Win Mcnamee/Getty Images
The White House has ruled out using a legal veto to force Congress to extend the US debt limit as conservative Republicans
threaten to take what the Treasury described as a potentially
catastrophic economic standoff to the brink of a 17 October deadline.
President Obama had been encouraged by senior Democrats to call the bluff of hardline Republicans who want to add a debt limit refusal to an existing spending impasse that has already shut down much of the federal government.
Some Democrats argue that powers granted under the 14th amendment to the constitution, which was introduced to control southern states after the civil war, would allow the president to unilaterally borrow money if there was such a threat to the credit-worthiness of the US.
"Using the 14th would show the Republicans he means business," one former aide to Bill Clinton told the Guardian last week.
But the White House ruled out the option on Thursday, ending days of Washington debate about whether this obscure legal authority might provide a way out for Obama – at least from one half of Republicans' fiscal pincer movement. "The administration does not believe the 14th amendment gives power to the president to ignore the debt ceiling," said spokesman Jay Carney.
"The fact that there is significant controversy around the president's authority to act unilaterally means that it would not be a credible alternative to Congress raising the debt ceiling and would not be taken seriously by the market."
With options dwindling for forcing Republicans to drop their fight, Obama faces a protracted battle linking both spending and borrowing authority in a combined budget standoff.
Some conservative lawmakers are even questioning administration insistences that Congress must increase the debt limit by 17 October.
Congressman Jim Sensenbrenner, one of several Republicans who first urged speaker John Boehner to link the budget with their demands to scrap healthcare reform, said the government shutdown may change the debt deadline by slowing down spending. "I don't know if the drop dead date on the debt limit is going to be 17 October because the government is not spending any money now," he told the Guardian. "This might get pushed back a little bit further."
Sensenbrenner also argued that public sympathy was shifting towards Republicans as the government shutdown wore on. "What I'm hearing from the public, mostly from phone calls that we get here and in my Wisconsin office, is that for a while Republicans were getting blamed for stonewalling but after Sunday – when we sent five proposals over to the Senate – the pendulum is starting to swing the other direction," he said.
"Where the public is at now is a lot different than in previous debt ceiling fights including August 2011. People are concerned about the debt because the debt has really ballooned and the president has got to be much more specific and convincing than just saying we've got to raise it so the government can pay its bills."
Earlier on Thursday, the US Treasury insisted that the shutdown would not affect its estimate of when the government would run out of cash, and warned that the US was heading toward a catastrophic event that could plunge the country into financial crisis.
A default would be unprecedented and has the potential to be catastrophic," Treasury said in a report. "The negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse," the report said.
A row over the debt ceiling in 2011 led to a historic downgrade of the US's debt and panic on stock markets worldwide. "As we saw two years ago, prolonged uncertainty over whether our nation will pay its bills in full and on time hurts our economy," Lew said.
"Postponing a debt ceiling increase to the very last minute is exactly what our economy does not need – a self-inflicted wound harming families and businesses. Our nation has worked hard to recover from the 2008 financial crisis, and Congress must act now to lift the debt ceiling before that recovery is put in jeopardy."
The report came as US investors appeared to be getting increasingly nervous about the impact of the government shutdown and the upcoming debt ceiling debate. The Dow was down more than 160 points in morning trading and has closed down eight of the last 10 trading days.
The Treasury report said that the last row over the debt ceiling, which was resolved at the 11th hour, had persistent, negative consequences on the wider economy. "The financial markets stress that developed in August of 2011 persisted for many months. Then, as now, the economic expansion was vulnerable to adverse shocks," Treasury said.
Even the possibility of a default could decrease household wealth, increase borrowing costs and shake business confidence, the report said. "In the event of a default, the US economy could be plunged into a recession worse than any seen since the great depression."
The US dollar and Treasury securities are at the center of the international finance system. In the catastrophic event that a debt limit impasse were to lead to a default on Treasury securities, financial markets could be shaken to their core as was seen in late 2008," the Treasury said.
The Treasury reached its borrowing limit in May and has been using "extraordinary measures" to fund payments ever since. Treasury secretary Jack Lew expects to exhaust those measures by 17 October and the congressional budget office expects the nation could start defaulting on obligations by 22 October unless swift action is taken.
copy http://www.theguardian.com/
President Obama had been encouraged by senior Democrats to call the bluff of hardline Republicans who want to add a debt limit refusal to an existing spending impasse that has already shut down much of the federal government.
Some Democrats argue that powers granted under the 14th amendment to the constitution, which was introduced to control southern states after the civil war, would allow the president to unilaterally borrow money if there was such a threat to the credit-worthiness of the US.
"Using the 14th would show the Republicans he means business," one former aide to Bill Clinton told the Guardian last week.
But the White House ruled out the option on Thursday, ending days of Washington debate about whether this obscure legal authority might provide a way out for Obama – at least from one half of Republicans' fiscal pincer movement. "The administration does not believe the 14th amendment gives power to the president to ignore the debt ceiling," said spokesman Jay Carney.
"The fact that there is significant controversy around the president's authority to act unilaterally means that it would not be a credible alternative to Congress raising the debt ceiling and would not be taken seriously by the market."
With options dwindling for forcing Republicans to drop their fight, Obama faces a protracted battle linking both spending and borrowing authority in a combined budget standoff.
Some conservative lawmakers are even questioning administration insistences that Congress must increase the debt limit by 17 October.
Congressman Jim Sensenbrenner, one of several Republicans who first urged speaker John Boehner to link the budget with their demands to scrap healthcare reform, said the government shutdown may change the debt deadline by slowing down spending. "I don't know if the drop dead date on the debt limit is going to be 17 October because the government is not spending any money now," he told the Guardian. "This might get pushed back a little bit further."
Sensenbrenner also argued that public sympathy was shifting towards Republicans as the government shutdown wore on. "What I'm hearing from the public, mostly from phone calls that we get here and in my Wisconsin office, is that for a while Republicans were getting blamed for stonewalling but after Sunday – when we sent five proposals over to the Senate – the pendulum is starting to swing the other direction," he said.
"Where the public is at now is a lot different than in previous debt ceiling fights including August 2011. People are concerned about the debt because the debt has really ballooned and the president has got to be much more specific and convincing than just saying we've got to raise it so the government can pay its bills."
Earlier on Thursday, the US Treasury insisted that the shutdown would not affect its estimate of when the government would run out of cash, and warned that the US was heading toward a catastrophic event that could plunge the country into financial crisis.
A default would be unprecedented and has the potential to be catastrophic," Treasury said in a report. "The negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse," the report said.
A row over the debt ceiling in 2011 led to a historic downgrade of the US's debt and panic on stock markets worldwide. "As we saw two years ago, prolonged uncertainty over whether our nation will pay its bills in full and on time hurts our economy," Lew said.
"Postponing a debt ceiling increase to the very last minute is exactly what our economy does not need – a self-inflicted wound harming families and businesses. Our nation has worked hard to recover from the 2008 financial crisis, and Congress must act now to lift the debt ceiling before that recovery is put in jeopardy."
The report came as US investors appeared to be getting increasingly nervous about the impact of the government shutdown and the upcoming debt ceiling debate. The Dow was down more than 160 points in morning trading and has closed down eight of the last 10 trading days.
The Treasury report said that the last row over the debt ceiling, which was resolved at the 11th hour, had persistent, negative consequences on the wider economy. "The financial markets stress that developed in August of 2011 persisted for many months. Then, as now, the economic expansion was vulnerable to adverse shocks," Treasury said.
Even the possibility of a default could decrease household wealth, increase borrowing costs and shake business confidence, the report said. "In the event of a default, the US economy could be plunged into a recession worse than any seen since the great depression."
The US dollar and Treasury securities are at the center of the international finance system. In the catastrophic event that a debt limit impasse were to lead to a default on Treasury securities, financial markets could be shaken to their core as was seen in late 2008," the Treasury said.
The Treasury reached its borrowing limit in May and has been using "extraordinary measures" to fund payments ever since. Treasury secretary Jack Lew expects to exhaust those measures by 17 October and the congressional budget office expects the nation could start defaulting on obligations by 22 October unless swift action is taken.
copy http://www.theguardian.com/
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