Bill Clinton: Brief Debt Default 'Might Not Be Calamitous' [UPDATED]

This story was updated to include a statement from Clinton's spokesman.

Former president Bill Clinton expressed optimism Wednesday about the immediate consequences of failing to raise the debt ceiling by the August 2 deadline.

"If we defaulted on the debt once for a couple of days, it might not be calamitous," Clinton said at a fiscal summit sponsored by the Peter G. Peterson Foundation. The trouble would come only "if people thought we weren't going to pay our bills any more and ... they would stop buying our debt," he explained, according to Politico.

Clinton also downplayed the results of a recent Washington Post poll, which showed that a majority of Americans are more worried about Congress raising the debt ceiling than they are about a default. Voters "haven't lived through [a default]," Clinton said. "Nobody knows what will happen."

Previous predictions about the fallout from a debt default have been notably more severe. Federal Reserve Chairman Ben Bernanke, Treasury Secretary Timothy Geithner and President Obama have all warned that it would trigger dire consequences, ranging from devastation of the U.S. financial system to a global recession.

[UPDATE: 2:15 p.m.

Clinton's spokesman, Matt McKenna, released a statement Wednesday afternoon clarifying Clinton's remarks:

"We regret if there has been a misinterpretation of a comment President Clinton made about raising the debt limit. President Clinton did not in any way mean to suggest that a default would not be highly damaging for the economy even for a very short period of time. He inadvertently misspoke. What he meant to say was that if a vote to extend the debt limit failed in advance of a default, that might not be harmful for a couple of days, but that if people thought that we might actually default, that in his words 'we were literally not going to pay our bills anymore, then they would stop buying our debt.'"]

Below is a rundown of some of the effects of failing to raise the debt ceiling.

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The Stock Market Takes A Dive

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If the U.S. starts defaulting on its debt, everybody who owns U.S. stocks and bonds will take a big hit. This will affect the big banks, corporations and even countries -- pushing some toward bankruptcy. That's the kind of slide that can spark a panic. On a more personal note, your 401(k) and/or pension will suffer big losses. It could take a long time to rebuild those funds, delaying retirement -- or making it impossible.

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If the U.S. starts defaulting on its debt, everybody who owns U.S. stocks and bonds will take a big hit. This will affect the big banks, corporations and even countries -- pushing some toward bankruptcy. That's the kind of slide that can spark a panic. On a more personal note, your 401(k) and/or pension will suffer big losses. It could take a long time to rebuild those funds, delaying retirement -- or making it impossible.

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Comments

[Deaconess]

06:37 PM on 05/29/2011

We are a wealthy nation but there are huge disparities in the distribution of wealth, education, power and privilege. Unless those disparities are addressed, we will never solve our economic problems And regarding this, the Democrats and Bill Clinton, are the only ones who are making any sense. The Republans want to make it worse.

[Deaconess]

05:35 PM on 05/29/2011

I listened to Bill Clinton's comments for over an hour on public radio and was amazed at his brilliant, pragmatic comments. We need to listen to him and follow his advice. I hope Congress was listening.

[hg wells]

11:32 AM on 05/26/2011

I think it would be a very positive thing for the world balance of power (between governments and capitalists) to introduce risk into gov't bonds.

[dtlewis]

11:12 AM on 05/26/2011

Sure Bill, just like the NAFTA driven rising tide will lift all boats. I really can't tell you how very comforted I am that you've tossed your phony two cents into this (at least not without having my post scrubbed.) Do your nation and your countrymen a big favor and vanish from the public forum.

[hg wells]

11:33 AM on 05/26/2011

Do you know Detroit lost more business to the south of the US than it ever lost to Canada or Mexico?

[dtlewis]

11:51 AM on 05/26/2011

A cite to at least one reputable source for the data in support of your assertion would be helpful in persuading me to adopt your view on that. NAFTA is but one issue. The man ushered in deregulation that enabled the financial markets to perpetrate frauds of unprecedented magnitude as well as the trade agreements he signed off on that remain of questionable wisdom. I stand by my earlier post until I see the data and am satisfied that it accurately reflects the realities it purports to represent.

[Countess]

10:58 AM on 05/26/2011

Bill Clinton and George Bush and their economic teams were most responsible for the financial disaster that people are still paying for and giving credence to the arguments of the right wing extremists shows that he has not learned anything.

[Deaconess]

05:36 PM on 05/29/2011

Bill Clinton wiped out the deficit. George Bush caused the current problems.

[lcdrjsm]

10:46 AM on 05/26/2011

The man who gave us NAFTA, repealed Glass-Stegall, and signed the Commodites Futures Modernization Act thinks he still has credibility on economic issues.

[hg wells]

12:16 PM on 05/26/2011

Clinton has already said repealing the G_S act was a mistake.. last I checked George Bush had 8 years to correct the mistake and Obama has had three. What's the delay?

[Harrison Meeske]

10:28 AM on 05/26/2011

The "ME" generation fears the needs of others and practices false Chistian values: they sing of virtues but only want to protect their own little mite and fear the government because it just may catch their petty criminal activities like selling dangerous and tainted goods, cheating on quality etc etc. The poor are evil because they have nothing and are at fault for not having work and money like they do..walk a mile in their shoes and see how good they have it....just as fine a corporate thieves and inheritors of wealth;;;;

[AZreb]

10:17 AM on 05/26/2011

Have Bernanke and Geithner said anything to cause me to trust their words? NO.

[oldstudent10]

09:08 AM on 05/26/2011

He's a right-wing Republican plant! BC is now the enemy, he can't be speaking the truth because we believe something else! Call him names and call his knowledge and motives into question quick!

Oh, wait a minute...it is already happening below....never mind....

[rakrobn]

07:16 PM on 05/27/2011

His policies were Republican policies, teaturd. Lookup triangulation. We already knew LONG before this comment, Bill Clinton's "centrist" deregulating policies that led to the economic collapse.

[Rjmartinelli]

08:44 AM on 05/26/2011

First he says this, then he's caught rubbing elbows with Paul Ryan...what kind of game is Clinton playing that he's running to the right so quickly?

[kitsmom1990]

08:26 AM on 05/26/2011

OK, Bill, I think you were a good President. I voted for you twice and I would vote for you again (I just would not choose you for my husband) but on this one, HAVE YOU LOST YOUR MIND?

[SueEll]

07:57 AM on 05/26/2011

There was a long article in Vaniety Fair about the fantastic job Hilary Clinton is doing. President Obama made a speech about Isreal and the middle east last week that can only help to support her impressive work toward peace in that area. And then, of course, Bill has to step in and grab headlines with controversial comments. He really is a_creep in more ways than one.

[taloolahtoo]

07:16 AM on 05/26/2011

the man who removed the Glass-Steagal act has the gall to offer economic advice?

[godsonecooldude]

07:13 AM on 05/26/2011

I think all you youngsters need to do some reading about our past presidents.Even about the depression It mite suprise some of you who was in office when our country fell apart, Oh and steve did I read that rite off regans corrections lol Is debt what republicans call it clinton payed it off.

[rickroland]

06:01 AM on 05/26/2011

The fact is, that with or without raising the debt ceiling, any holding stocks or bonds will, sooner or later, get hammered. Why? Unless and until our Federal government gets its massive out-of-control spending in check, the value of the dollar is going to be severely hammered. As a result, Stock and bond holders, alike, will lose value in their investments, massive losses.

[nash984954]

08:33 AM on 05/26/2011

Really? Only spending is the problem, you say? What about the revenue problem. What about the raiding of the SS trust fund to run the gov't the last thirty years after raising the payroll taxes anticipating baby boomer retirement, all the while lowering the taxes for the very rich? What about the decline of corporate taxes since 1943 compared to the individual taxes at a ratio of 1.1 for individuals, .4 for corporations?
Talk about hammered, it is the middle class getting it and you want to remove the things they are paying more for than raising taxes on corporations and the wealthy. Government spending is not the problem, less revenue is the problem. And, of course, the overemphasis of value given to the poor investors and stock and bond holders, the real victims in this economic fiasco. The stock and bond holders should have each of their transactions taxed and there should be an investors tax just for them, too. Wall Street is doing quite well, which means investors and stock and bond holders are doing well also, it is the middle class who is getting screwed.
I thought of something, why not lower the value of the dollar, which will make US products more competitive and people will want to buy them. In effect, that will address the lopsided trade deficit. Increasing the value of the dollar puts US products out of the reach of buyers. Don't believe it? What about the cheap products from China?

[statementOfIncensed]

11:06 AM on 05/26/2011

This is an underwear gnomes argument.