White House Talking Points Invoke '08 Crisis As Possible Debt Ceiling Outcome

WASHINGTON -- With the U.S. government officially hitting its debt ceiling on Monday, the Obama administration is distributing a set of talking points emphasizing the “panic” and “catastrophic” outcome that would result from a full-on default.

The talking points, sent over by a Democratic source, strike the same dire tone that administration officials have done for the past few weeks, if not months. The one noteworthy hook may be the invocation of the 2008 financial crisis, which the White House holds up as a possible template for what would happen should Congress not pass a bill raising the ceiling from its current level.

Below are the talking points in full:

Talking Points: America Living up to its Obligation

• Our nation must live up to its obligations. It is critically important that Congress act as soon as possible so that the full faith and credit of the United States is not called into question.

• Failure to do so would force the United States to default on its legal obligations, such as payments to our servicemembers, citizens, investors, and businesses. This means the United States would need to stop, limit, or delay payment on military salaries, Social Security and Medicare, tax refunds, contractual payments to businesses for goods and services, and payments to our investors.

• This would be an unprecedented event in American history. This would create catastrophic damage to our economy, significantly reducing growth and increasing unemployment.

• Investors in the United States and around the world would be less likely to lend us money in the future. And those investors who still choose to purchase Treasury securities would demand much higher interest rates, increasing the cost of paying interest on the national debt and worsening our nation’s fiscal challenges.

• America failing to meet its obligations would not only increase borrowing costs for the Federal government, it would impact families, businesses and local governments.
  • Treasury securities set the benchmark interest rate for a wide range of credit products, including mortgages, car loans, student loans, credit cards, business loans, and municipal bonds.
  • An increase in Treasury rates would make it more costly for a family to buy a home, purchase a car, or send a child to college. It would make it more expensive for an entrepreneur to borrow money to start a new business or invest in new products and equipment. We simply can’t afford this.
• America failing to live up to its obligations would also lead to a sharp decline in household wealth. Higher mortgage rates would depress an already fragile housing market, causing home values to fall.
• Additionally, this would substantially reduce the value of the investments – including Treasury securities – held in 401(k) accounts and pension funds, which families depend on for their retirement security.
• As the recent financial crisis demonstrated, a severe and sudden blow to confidence in the financial markets can spark a panic that threatens the health of our entire global economy and the jobs of millions of Americans.

The reference to the '08 crisis isn't entirely new. Treasury Secretary Timothy Geithner made a similar point in a letter he sent to Sen. Michael Bennet (D-Colo.) late last week. Tactically, however, it's an interesting, if not obvious, move: pointing to a fresh, tangible moment rather than esoteric economic arguments, as a way of moving public opinion.

Earlier on Monday, White House Press Secretary Jay Carney told reporters that the President had been keeping in touch with the members of Congress who are attempting to forge an agreement on raising the debt limit. He wouldn’t offer specific details as to the calls President Obama has made but accused those lawmakers who downplaying the significance of a default as “whistling past the graveyard.”

“It is a foolish thing to suggest that we could somehow as the United States of America default on our obligations and that it would not have seriously negative consequences if we suddenly stop paying our bills on a third of our obligations,” said Carney.

Comments

[robinhood1]

09:05 PM on 07/15/2011

Walter Levy was born in Germany but moved to New York in 1933. If the US republic unraveled, where would you move to?

[robinhood1]

09:02 PM on 07/15/2011

Oil consultant, the late Walter Levy quoted in "Wealth War and Wisdom" by Barton Biggs:

"My father was a lawyer and he had taken out an insurance policy in 1903, and every month he had made payments faithfully. It was a 20-year policy, and when it came due, he cashed it in and bought a single loaf of bread."

Don't think it could not happen here.

[Bruce Barron]

05:35 PM on 07/13/2011

I wouldn't raise the debt ceiling one penny.Boehner entering into a dialogue with Obama is like Eve entering into a conversation with the serpent-the prince of liars.
I would begin by not paying the Fed ever again a single penny.This would solve much.
Raising the debt ceiling raises the debt,the deficit,and increases interest payments.China is building the world's largest zoo absolutely free on debt payments made to them by taxpayers.
These entitlements are unconstitutional and Congress can end them anytime anyway.
Obama should do his thing and order the treasurer to issue whatever checks he deems necessary and withhold SS checks if in accord with his wisdom.He can claim that he has the right to do it under the 14th Amendment part 4,from emergency,from necessity or whatever and blame the irresponsible Republicans.I would like to see if any repercussions.
It is interesting that the federal budget can be questioned:
Art1 Sec9:
No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.

Why publish if it can't be questioned? To rub our nose in it?
Where is the "full faith and credit of the US" found in the Constitution?
SS is my only source of income.I'd rather do without than see the Republicans cave in.There is plenty of tax revenue.

[robinhood1]

08:52 PM on 07/15/2011

When the Soviet ruble collapsed in 1991, Soviet pensioners were among the worst hit. Their pensions did not keep up with inflation and their savings were effectively wiped out. In the space of a couple of years, the old ruble lost over 99% of its value. Be careful what you wish for.

[CopyKat]

10:42 AM on 05/19/2011

The same CBO, that said the Health Bill was debt netural...Right....

[stopgov]

02:06 PM on 05/17/2011

I think as good Americans, we should support Mr. Obama on the debt ceiling issue. To quote Mr. Obama “The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure,” he said. “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. … 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 and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit.” He said this in March 2006, as he found the notion of raising the debt ceiling quite distasteful. He voted NO!

[Ron Weaver]

01:52 PM on 05/17/2011

Tea Party has third string in here today. Maybe the first & second string jumped ship when they saw things weren't going so good for them. Smart move

[Rexter]

12:15 PM on 05/17/2011

When it comes to political rhetoric and demogoguery how do you know what to believe? I think their priorities are party and political career foremost, hidden agendas that aren't on the table, followed by deals and side deals. The wishes and concerns of constituents that put them in office are somewhere further down on that list.

That sounds highly cynical about our system, but look at the mess we're in. Most of the players involved in the blame game and finger pointing have been in office for many years. All of them, democrat or republican, are all accountable for these current events, yet they play as saviors now coming to our rescue (if we vote for them) with our best intentions in mind. I wonder.

The trust is gone, this is what remains. A balanced budget ammendment and term limits would give the people a better chance at controlling these folks.

[wilkesgm]

11:53 AM on 05/17/2011

As a result of Republican policies, millions are struggling to survive on unemployme­nt benefits they paid for via unemployme­nt insurance. ..............So, even though Democrats have had control over all government spending since 2007 - (four years ago) it's Republican policies that have hurt the middle class? I'd be very disappointed in my Democrat commisars if I was you. They have had two years of complete control over the house, senate and white house. Why didn't they do anything? Oh, that's right, they blocked energy production - which causes energy prices to go up, which hurts the poor first and most. What a brilliant idea. Oh, they also borrowed 6 trillion dollars to pay for social programs that drain the economy and reduce the private sector's ability to bounce back from the recession. What brains these people are. First, do nothing to turn back the "Republican" policies and then spend our country into forclosure, then continue to have a ban on domestic oil exploration because as we know, more oil doesn't drop the price. Brilliant! God Bless the EPA. God Bless Obama's massive debt. Oh, wait, Democrats don't like it when you talk about God. They are the supreme power on the planet. My bad. I forgot.

[daradams]

01:36 PM on 05/17/2011

No No No ---Employees do not pay for unemployment insurance - ie "unemployme­­nt benefits they paid for via unemployme­­nt insurance. " This is a untrue statement. No - no - no -- it is paid for by the EMPLOYER -- not the EMPLOYEE -- so - no - the person does not pay for these unearned benefits...........­....

[jjs71]

11:52 AM on 05/17/2011

I love how some tell us that all the US Gov't needs to do is just cut spending like this is some kind of panacea that will just fix everything. What would happen is that the ~40% of GDP that the Gov't contributes to would go down significantly, in the short term losing jobs and lowering revenue. And all the things that the Gov't supports and funds. Those services would disappear (and believe me you would miss a lot that the Gov't does) or the cost of those services would be passed onto the local level. So, you would be paying no matter what. I do believe that the Gov't needs to cut WASTE and conform to stricter accounting practices, but don't make the mistake of associating Gov't waste and spending. They are two different things.

[stopgov]

02:14 PM on 05/17/2011

Well lets see, you have revenues (income or paycheck) and you have expenses (that's spending). When you spend more than you earn, you have a deficit, or debt. If you take out a loan, then you pay the principle (amount of the loan) plus interest. Spending is increasing every year, as is our debt (more loans). So if you can't get a raise or work a second job to increase your revenues, then you need to cut your expenses. It's the spending! We have a spending problem!!!!

[jjs71]

01:52 PM on 05/18/2011

Let me clarify, since it appears the simplistic Fox News Parrots and Sheep are out and they are responding to arguments I am not making. Let me give you an example based on one you addressed above. Let’s say a man walks in to a store to buy groceries, it costs $50, and he pays $200. The reason he is broke is not because he was spending his money, he is broke because he is wasteful with his income.

Our Gov't has a history of wasteful practices associated with how our money is spent. There is money wasted through inefficient/duplicative/overspending vs. actual cost (i.e. Gov't Contractors). We are extremely poor when it comes to a detailed accounting or accountability as to where our money is going. Taking a hatchet to our spending doesn’t fix the underlying cause as to why we are spending more than we take in.

[wilkesgm]

11:46 AM on 05/17/2011

"And STOP allowing our jobs to go abroad!" - I hate to tell you, but they outlawed slavery about 150 years ago. You can't stop them from leaving. The more the government makes it difficult to do business in the US, two things happen. Businesses close their doors or leave. It's their only choices. Since corporations are run by private investors, the stock holders get to decide. So, my friend, if you owned stock in a company and the only choices were to lose your life's savings or let the country go where it could be profitable, what would you do? Either way, the US loses. The solution is to repeal this nonsense propaganda that business is bad and corporations are evil. Between government regulation and corporate taxes, what idiot would start a company in the US, these days?

[wilkesgm]

11:35 AM on 05/17/2011

All they have to do to fix it is stop government spending. Then they have to roll back as much of the 6 trillion in debt created by the Democrats as they can. I realize that the majority of HuffPost people are liberals, so I'll explain it to you. All money bills start in the House. The Senate has to approve them. Then the President signs them. He can veto a bill, but if the congress has the votes, they can override his veto. Meaning, since 2007, it's all Democrat debt. George Bush couldn't have stopped them - and didn't bother because they simply would have overridden his veto. Now, you folks want to live in fantasy land and blame Bush for all this. Nope. The Democrat House, Senate and White House could have repealed anything Bush did the day Obama was sworn in. After four and a half years of Democrat "borrow your way to prosperity" Obama wants to spend even more money. He just gave Brazil 10 billion dollars to help their domestic oil production to "help their economy." Gee, you mean that boosting domestic oil production helps a struggling economy? What a concept. Genius. Shear genius. So, here's the Obama doctrine. Close off domestic energy production to free us from dependence on foreign oil. Borrow as much money as you can to relieve us from debt. Brilliant!

[jjs71]

12:13 PM on 05/17/2011

US Debt 2000 ($5,674,178,209,886.86), US Debt 2008 ($10,024,724,896,912.49). US Debt nearly doubled during the Bush years. BTW...Oil production in the US, if increased would amount to a drop in the bucket, about a 10% increase years from now (US currently ~9 million/day, import ~12 million/day) Also, current prices are not a result of supply/demand, they are a result of a commodity that is overly speculated on with little controls. Maybe less FOX news and more thinking for yourself.

[adavis1527]

10:31 AM on 05/17/2011

What are NECRO-THIEVES? You know these guys. They try to con you every day. Now it is time for the "word loving left" to choke on these words. This is a horrific form of elderly abuse. and the left needs to have it put to them before they put it to us.

Suddenly as I explained one of the reasons I am offended by the left, I realized that they like "word games", redifine known words to suit themselves and essentialy think they are brilliant if they can con someone who they then feel superior to, for the reason that they could con us. So here is a word for them to choak on. "NECRO-THEIVES" These people along with "ELDERLY- ABUSERS" comes to mind. These LIBERALS? are pushing an ideology which says "we are entitled to the life earnings of any elderly person who is impaired sufficently for our administration to rape their bank account when they die and are unable to defend it from our pocket pickers."

[MrCS]

10:28 AM on 05/17/2011

I've been reading a lot of the posts on here and I don't see very many that are actually on topic. The topic is raising the debt ceiling. Any knowledgeable person knows that we have no choice but to raise the ceiling. We have overspent our income for decades and owe our lenders a lot of money that we as a nation have agreed to pay back. Many of the arguments I've seen to not raise the debt ceiling have some merit, but in the real world we must pay our debts. I agree that we should work hard to reduce our spending and get a balanced budget, but the debt ceiling issue stands on its own. If people and our representatives are serious about reducing our deficit they need to put EVERYTHING on the table and earmark cuts and revenue increases directly to that purpose. To default on our debts is unthinkable. The harm it could cause is beyond the pale. Swallow the bitter pill one more time and then get serious about fixing this problem. Stop the finger pointing and get busy. There is plenty of blame to go around.

[donachuk]

10:32 AM on 05/17/2011

Bull

[MrCS]

10:46 AM on 05/17/2011

Bull? A one word response? Whatever do you mean?

[sannapropp]

10:23 AM on 05/17/2011

To piggy back on something Muchelle Antoinette once said: "For the first time in my adult life, I don't believe one word that comes out of the White House as truth." It's all propaganda.

[MrCS]

10:40 AM on 05/17/2011

LOL All Information, and I use that term loosely, from all current sources is propaganda. Choose your poison. There are a lot of lies out there and dam little truth. Trying to sort it out is a full time job. It all boils down to statistics and other damn lies. Clever people can spin the "facts" to support any position, no matter how far fetched.

[sannapropp]

10:49 AM on 05/17/2011

Yes, but never has the media been accomplices. We used to depend on journalists to get to the truth so that we could make informed decisions. That's the crux of the problem today.

[JADEONA]

10:22 AM on 05/17/2011

I want to talk as an american citizen with no dog in this fight..When does this become an acoountability for this president?? He spent this money and where are we..WORST OFF.. the stimulis was suppose to fix the problem instead it made it worst.....

[lawmutt55]

11:30 AM on 05/17/2011

To begin with, if you are an American citizen, you have a dog in this fight. Next, the President had no hand in spending most of the national debt. When he took office, the country was operating under the final Bush budget until September 30, 2009. By that time the national debt was about 11 - 12 trillion doillars. As to the stimulus, where have you been for the last five years? The national economy was teatering on the brink and about to fall into a depression where there is 30 - 40% unemployment. The stimulus kept the economy from getting that bad. It did not make it "worst".