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(by Mark Felsenthal and Matt Spetalnick, Chicago Tribune) WASHINGTON (Reuters) – President Barack Obama on Monday rejected any negotiations with Republicans over raising the U.S. borrowing limit [the debt ceiling], accusing his opponents of trying to extract a ransom for not ruining the economy in the latest fiscal fight.
At a White House news conference called to promote his position on the budget, Obama vowed not to trade cuts in government spending sought by Republicans in exchange for raising the borrowing limit.
“What I will not do is to have that negotiation with a gun at the head of the American people,” he said.
With an agreement to prevent the economy falling over [the] “fiscal cliff” barely two weeks old, Washington has already begun skirmishing over a new fiscal issue: the debt ceiling, which [sets] a limit on how much the government can borrow.
The United States could default on its debt if Congress does not increase the borrowing limit [the amount of money it is legally permitted to borrow], a prospect Federal Reserve Chairman Ben Bernanke warned against in separate comments on Monday.
Obama has tangled repeatedly with Congress over budget and spending issues, and on Monday he said Republicans would bear the responsibility for the consequences of a default.
“They can act responsibly, and pay America’s bills or they can act irresponsibly, and put America through another economic crisis,” he said. “But they will not collect a ransom in exchange for not crashing the American economy.”
Republicans want Obama to cut some spending to rein in the deficit before they agree to raise the debt limit again.
Obama must get “serious about spending and the debt limit is the perfect time for it,” Senate Republican leader Mitch McConnell said. “The American people do not support raising the debt ceiling without reducing government spending at the same time,” said Republican John Boehner, the House of Representatives speaker.
The last debt ceiling fight, in 2011, upset world financial markets. Obama [presented] the borrowing issue as one that will affect many Americans and sensitive industries.
“If congressional Republicans refuse to pay America’s bills on time, Social Security checks and veterans’ benefits will be delayed. We might not be able to pay our troops, or honor our contracts with small business owners. Food inspectors, air traffic controllers, specialists who track down loose nuclear material wouldn’t get their paychecks,” he said.
Obama [told] Republicans that he [believes he] won the November election partly on his approach to fiscal issues. …..
Obama’s unexpected news conference could have been a pre-emptive strike aimed at influencing strategy sessions among Republican lawmakers scheduled for later this week.
The Treasury Department warned on Monday that the United States will run out of ways to prevent a default in mid-February or early March if the $16.4 trillion ceiling on borrowing is not raised.
[President] Obama said he would agree to talk about steps to trim the U.S. budget deficit, but made clear he wants to keep that discussion separate from the debt ceiling increase.“The issue here is whether or not America pays its bills,” he said. “We are not a deadbeat nation. And so there’s a very simple solution to this: Congress authorizes us to pay our bills.”
He held to his position that deficit reduction should include measures to raise revenue [taxes] and not come from spending cuts alone.
Republicans have rejected that approach, saying the “fiscal cliff” deal, which raised taxes for the wealthy while maintaining low tax rates for most Americans, should have put to rest any more discussion over tax increases. …
Fights with Congress over taxes and spending have overshadowed much of his domestic agenda during most of the last two years, with the president facing legislative gridlock that shows little sign of abating. …..
NOTE: The debt limit is one of a trio of deadlines looming around the end of February, including automatic deep spending cuts that were temporarily put off in the “fiscal cliff” deal, and the end of a stopgap government funding measure. (from the article)
(Additional reporting by Jeff Mason and Steve Holland, Editing by Alistair Bell and Christopher Wilson)
Copyright 2013 Reuters. Reprinted here for educational purposes only. May not be reproduced on other websites without permission from The Chicago Tribune. Visit the website at ChicagoTribune.com.
Questions
1. Define the following terms used in the article:
- fiscal (from para. 1)
- budget (from para. 2)
- debt ceiling/debt limit (para. 4)
- default (para. 5)
2. A national debt is how much money a federal government owes. What is President Obama asking Congress to do regarding the national debt?
3. What did the President accuse Republicans of doing during his press conference on Monday?
4. What compromise do Congressional Republicans want President Obama to make for them to ok an increase in the debt ceiling?
5. What will happen if the debt limit is not raised?
6. Consider the following:
- President Obama also said during his press conference: “[Refusing to raise the debt ceiling] would be a self-inflicted wound on the economy. Even entertaining the idea of this happening, of the United States of America not paying its bills, is irresponsible. It’s absurd.”
- Before becoming president, as a U.S. Senator Obama voted several times against raising the ceiling. At that time he said that raising the debt ceiling would constitute “leadership failure.” Yet today, with the debt much larger than it was then, President Obama argues that the ceiling should be raised as a pro forma matter.
- Republican leaders say that President Obama must get “serious about spending and the debt limit is the perfect time for it,” and that “The American people do not support raising the debt ceiling without reducing government spending at the same time.”
a) What do you think would be best for our economy: Should the president give in and make some cuts in spending to get Republicans to ok an increase in the debt ceiling, or should the Republicans give in and raise the debt ceiling without the President agreeing to any spending cuts? Explain your answer.
b) Ask a parent the same question. Discuss your answers.
Background
The U.S. national debt as of Jan. 10 is $16.4 trillion.
- On January 10, 2013, debt held by the public was approximately $11.577 trillion or about 73% of GDP. Intra-governmental holdings stood at $4.855 trillion, giving a combined total public debt of $16.432 trillion.
- As of July 2012, $5.3 trillion or approximately 48% of the debt held by the public was owned by foreign investors, the largest of which were China and Japan at just over $1.1 trillion each.
- Under Article I Section 8 of the Constitution, Congress has the sole power to borrow money on the credit of the United States.
- From the founding of the United States until 1917, Congress directly authorized each individual debt issuance separately.
- In order to provide more flexibility to finance the United States’ involvement in World War I, Congress modified the method by which it authorizes debt in the Second Liberty Bond Act of 1917. Under this act Congress established an aggregate limit, or “ceiling,” on the total amount of bonds that could be issued.
- The modern debt ceiling, in which an aggregate limit is applied to nearly all federal debt, was substantially established by Public Debt Acts passed in 1939 and 1941.
- The process of setting the debt ceiling is separate and distinct from the Federal budget process, and raising the debt ceiling does not have any direct impact on the budget deficit.
The United States public debt is the money borrowed by the federal government of the United States through the issue of securities by the Treasury and other federal government agencies. US public debt consists of two components:
- Debt held by the public includes Treasury securities held by investors outside the federal government, including that held by individuals, corporations, the Federal Reserve System and foreign, state and local governments.
- Debt held by government accounts or intragovernmental debt includes non-marketable Treasury securities held in accounts administered by the federal government that are owed to program beneficiaries, such as the Social Security Trust Fund. Debt held by government accounts represents the cumulative surpluses, including interest earnings, of these accounts that have been invested in Treasury securities.
Public debt increases or decreases as a result of the annual unified budget deficit or surplus. The federal government budget deficit or surplus is the difference between government receipts and spending. (from wikipedia)
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