Austan Goolsbee: Hitting Debt Ceiling Would Be 'First Default In History Caused Purely By Insanity'

NEW HAVEN -- There are, it seems, only two major issues that have a set time frame for political brinkmanship between the White House and Congressional Republicans. The Bush tax cuts will make for an interesting election-year dynamic when they expire in two years. Well before that, however, the president will have to persuade GOP leadership to ignore Tea Party insistence and allow for the country's debt ceiling to be raised.

That issue is set to come to a head this spring. So far the administration has been (or perhaps just expressed a sense of being) self-assured that the ceiling will be raised, but on Sunday its rhetoric was noticeably sharper.

Appearing on ABC's "This Week," Austan Goolsbee, the chairman of the Council of Economic Advisers, laid out the fairly alarming implications of the United States defaulting on its obligations while asking the question: What type of insanity would persuade us to do this?

"Well, look, it pains me that we would even be talking about this," he told co-host Jake Tapper. "This is not a game. You know, the debt ceiling is not something to toy with. If we hit the debt ceiling, that's essentially defaulting on our obligations, which is totally unprecedented in American history. The impact on the economy would be catastrophic. That would be a worse financial economic crisis than anything we saw in 2008."

"As I say that's not a game," Goolsbee went on. "I don't see why anybody's talking about playing chicken with the debt ceiling. If we get to the point where you've damaged the full faith and credit of the United States, that would be the first default in history caused purely by insanity. There would be no reason for us to default other than that would be some kind of game. We shouldn't even be discussing that. People will get the wrong idea. The United States is not in danger of default. We do not have problems with that. This would be lumping us in with a series of countries throughout history that i don't think we would want to be lumped in with."

The good news for Goolsbee and the president is that House GOP leadership does seem to see the deficit ceiling debate a bit differently than their incoming Tea Party brethren -- as does the intellectual establishment of the Republican Party, including George Will, who, following Goolsbee on ABC, criticized the idea of defaulting simply for symbolic reasons.

UPDATE: It's worth noting, as CBS Radio Mark Knoller does, that "the Debt Ceiling now stands at $14.294-trillion. The National Debt is now $423-billion away at $13.871-trillion and rising."

LATER UPDATE: Huffington Post's Ryan Grim notes that there is, in fact, a third issue with a set time frame for a showdown. The continuing resolution funding government -- which was put into law during the lame duck session -- expires in March 2011, leaving Congress with some tough choices over how to budget going forward.

Comments

[Leland Avants II]

01:55 AM on 01/08/2011

Why am I so attracted to this guy?!!?

[Twinz48]

12:52 PM on 01/05/2011

Roll back the tax cuts for those making more than $250K annually and cut the Defense budget.

[bllnsinchnge]

08:15 AM on 01/05/2011

"Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better."

[Kitten of D00M]

02:56 AM on 01/05/2011

It is a conservative delusion that the rich create jobs. Most CEO's who perpetrate massive layoffs are financially rewarded for doing so. In the 1970's, the average CEO made 30x the salary of the average worker. In 2009, CEO's made 263x more than the average worker.

http://www.ips-dc.org/reports/executive_excess_2010

[ehjay]

12:32 AM on 01/05/2011

The present economic condition is not new. It has happened to empires in the past. The present condition demonstrates that Capitalism is intrinsically flawed. With Capitalism, the power associated with wealth becomes concentrated in fewer and fewer hands, creating corporations that are too big to fail and they in fact take control of the government's economic and poltitical powers. Look at the string of GS people in the Fed and Treasury.The power behind the throne is a term that comes to mind. The need to invest and obtain a return that satisfies investor confidence exacerbates the pooling of wealth and disparity increases, resulting in what is being experienced.

[Danielle Burke]

04:27 AM on 01/05/2011

http://www.youtube.com/watch?v=zSvoj76NRLM

[bllnsinchnge]

08:18 AM on 01/05/2011

Corporatism is a better term. We have not seen true capitalism in a century.

[RatPack78]

12:00 AM on 01/05/2011

"The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a sign that the U.S. Government can't pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government's reckless fiscal policies. Increasing America's debt weakens us domestically and internationally. Leadership means that 'the buck stops here.' Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better." - Senator Barack Obama in 2006

[Wat Stearns]

11:17 PM on 01/04/2011

Here is a petition for U.S. federal election reform, so that Congress will obey the people not corporations: http://www.petitiononline.com/PoliTru3/petition.html.
If we act together now, we can still save our country.

[Kitten of D00M]

02:31 AM on 01/05/2011

I have a couple of problems with this petition. First, I object to making voting mandatory. I've always been able to see a clear difference between candidates, but many people do not, and feel that they are "choosing between two evils". As much disdain as I have for people who do not vote, I would never want to force someone to vote. That kind of defeats the point of having a free country... Second, the petition doesn't call for ranked-choice voting, which actually allows voters to "vote their conscience" without throwing away their votes.

"Under Ranked Choice, voters don't just tick the name of one candidate and walk away. They rank the various candidates—first choice, second, third, fourth and so on. If their first choice finishes out of the running, their vote is reassigned to their second choice."

http://www.thenation.com/blog/155550/we-need-majority-rule-elections

[xanas]

10:53 PM on 01/04/2011

We are at 13.8? And I've been using the number 12 myself for the last few months. This is ridiculous. We cannot print ourselves out of that hole and we cannot earn our way out of that hole with the existing demographics and top heavy entitlement programs.

Whether we increase the ceiling or not prepare for extreme stagflation in the future and possible hyperinflation if the Fed holds course with these ridiculously low interest rates and continual attempts to prop up housing that the expense of everything else.

[The Purple Finger]

01:38 AM on 01/05/2011

Sorry, there were no cuts. The rates stayed exactly the same. And then there's Obama himself voting against raising the debt ceiling -

http://www.nationalreview.com/corner/256199/obama-not-always-fan-upping-debt-ceiling-katrina-trinko

[xanas]

07:49 AM on 01/05/2011

Cuts in what... taxes? I'm aware the rates are the same as before, stealing less is always better in my opinion.

[TheVige]

08:53 PM on 01/04/2011

Sure there is a better way. Roll back the tax cuts for the top 2% passed last December. If you are looking to reduce the deficit, you can save almost $1 trillion over the next 10 years right here. Why should the middle class take another body blow for this economy? The people who caused this mess, the millionaires and billionaires on wall street, should be the ones paying to fix it.

[Less Taxes is better]

07:53 PM on 01/04/2011

Over 13,000 comments on a simple concept.

You can keep spending $1.25 a day and asking the guy behind you for 25 cents when you only have a $1.00. It criminal to allow that to happen more than once. Now we are asking the guy to hold the note until our kids start working and could pay him.

STOP SPENDING - THERE IS NO OTHER WAY. EITHER TODAY OR NEXT YEAR, YOU HAVE TO STOP SPENDING.

Pelosi did not do her job last summer, Obama the great communicator could not convince her to do her job so she was fired.

Now the House has to cut spending. Yes we are paying for two wars, but we also have been allow Congress and the Presidents to spend our money for silly projects.

Does not matter who spent what at this point, grow up, it about keeping the Chineese from owning more of our debt because our government is not able to control the spending.

[xanas]

10:56 PM on 01/04/2011

http://www.youtube.com/watch?v=Cd-SLRyuRq0

[ehjay]

12:37 AM on 01/05/2011

Bush was handed a sound economy by Clinton. Bush and his Republican cohorts dug this hole in 8 short years. The voters (in their wisdom?) declared they wanted more of it (only two months ago) by giving Congress back to the people that dug their grave. So much for voter intellect.

[The Purple Finger]

01:43 AM on 01/05/2011

Um, Bush's unemployment, averaged 5%, and that includes the two years after Nancy's Congress took over in '07 and tanked it.

Now we have Obama's 10%. Thank G0D Americans were smart enough to kick the children out of the car, take the keys back, and drive more sanely and maturely.

[Kitten of D00M]

02:33 AM on 01/05/2011

"Voter" and "intellect" do not belong in a sentence together.

[Danielle Burke]

07:50 PM on 01/04/2011

"The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better."- Barack Obama 2006
He voted against raising the debt ceiling.

[martyfrancom]

07:20 PM on 01/04/2011

This guy is disturbingly UNimpressive. It bothers me that he's the one the WH listens to ... they need to replace him with someone who is credible and articulate on the subject. I always feel like he's not sure of what he's saying ... just mu opinion.

[Less Taxes is better]

07:54 PM on 01/04/2011

He saying.... we are out of money and need to change the rules since we can not stop spending and will be broke soon.

IE: CA, IL & PA

[janmB]

04:26 PM on 01/04/2011

Using this economic crisis as cover to do what the Republicans have wanted for 70 years....dismantle all of what they call "entitlements" and protect the entitlements for the wealthy. Was this the plan when the republicans ran everything from 2001 to 2009 ...I beieve so when they created an 8 trillion dollar debt and couldn't fix the W.S. mess.
They're going to tie SS to job creation and the debt in order to sell it to a gullible public. The Democrats had better get the message out that SS isn't adding a dime to the debt, and has nothing to do with jobs. This scares me knowing how easily the public is persuaded by lies. It's even a lie to call SS an entitlement, because it's not.....it is and always has been fully funded by current workers to pay for retired workers.

[Less Taxes is better]

07:57 PM on 01/04/2011

If you take a dollar in, then you can't spend $1.25. Running a deficit might be acceptable for a short time but not for 140 years.

Andrew Jackson is the last President to have the US with no debt. We have have been paying interest ever since. How much have we wasted on interest that could go to the poor or green jobs. We need to payoff the landshark - China.

[Kitten of D00M]

02:36 AM on 01/05/2011

"...in order to sell it to a gullible public."
I believe you meant to say "impressionable" public. The word gullible was dropped from both the Oxford and Webster dictionaries in 2009.

[Grannyover70]

04:10 PM on 01/04/2011

For all of you who are willing for this country to default and who care not one whit who
will bear the brunt of the fall-out, here is what will happen, the very wealthy will take their wealth and run and the rest of us will bear the brunt of the debt, brought on by those very wealthy
who will survive unscathed. Poverty like you have never seen or imagined, we will be a third
world country for the time most of us have left.

Also, for all supposed deep thinkers who follow FOX so closely, when you say 47% of the people pay no taxes, there are qualifiers to that.
1) some of that 47% are the wealthy that manage to pay no Federal taxes.
2) if people had jobs they would be willing to pay their taxes
3) In fact everybody has to pay taxes, State and local, sales, licenses, fees, etc. Even
the poorest folk have to pay taxes and whatever percentage that turns out to be it has
to hurt even more than the people who actually pay 35% are hurt, which are very few. I doubt
seriously that those who actually pay Federal taxes of 35% have to worry about whether
they can afford food or medicine, but not both.

[Less Taxes is better]

08:01 PM on 01/04/2011

stop with the class envy and think about how much we have spent on interest.

The rich create jobs. since the rich have various revenue streams, they don't pay the normal taxes the middle class pays. Most investment people can get a millionaires tax burden under 10%, I pay a higher percentage and I am not rich.

so stop thinking the rich are playing by the same rules, Rangel knows, he spent 17 on the Ways and Means committee passing these rules while fighting against his own criminal acts.

This is about SPENDING and it needs to stop.

[hypnotoad72]

06:49 PM on 01/05/2011

The rich are also driving down wages. 

http://motherjones.com/kevin-drum/2010/01/vicious-cycle-stagnant-wages

http://www.mydd.com/story/2007/2/7/184312/5388
(proof about one corporation that has... and fudged the truth to congress as well.  Nice and philanthropic, huh?)

http://www.boston.com/jobs/news/articles/2007/11/25/the_economic_conspiracy_theory/

[kssaul]

04:06 PM on 01/04/2011

Think we're already seeing just how unimportant the Tea Party really is.

[Tea4u]

04:42 PM on 01/04/2011

How so?