White House warns of debt ‘Armageddon’
As a new political showdown looms over the economy following a defused budget row, aides also said President Barack Obama now "regrets" his vote as a senator against raising the debt ceiling in 2006, calling it "a mistake."
"The consequences ... of failure to raise the debt ceiling would be Armageddon-like in terms of the economy," said White House spokesman Jay Carney.
Congress must raise the US debt limit, or the maximum amount the Treasury is allowed to borrow, by May 16 or see the United States default on interest payments of its debt.
But the move has become embroiled in fiercely partisan battles over the economy and spending.
Carney warned that the result of failing to raise the debt ceiling were so grave, it would be irresponsible for politicians to exploit the drama for political gain.
"We don’t need to play chicken with our economy by raising the debt ceiling," said Carney.
However, Republicans who control the House of Representatives are demanding vast new spending cuts from Obama -- over and above the $38 billion agreed to end the budget row last week, in exchange for raising the debt limit.
Obama, under pressure to define the economic debate a week after launching his 2012 reelection battle, is due to tackle the issue -- and a budget deficit that is set to reach $1.6 trillion this year -- in a speech Wednesday.
Administration officials say that failure to raise the debt limit could drive up interest rates, making it more difficult for Americans to borrow money at a time when home values are depressed and market-linked pension savings are down.
They also say that global confidence in the US economy would be badly hit.
"The reality is the United States is the largest economy in the world. It is looked to around the globe as the anchor of the world economy and must establish, through this vote, its creditworthiness," said Carney.
The White House also delicately navigated around a vote made by Obama in March 2006 against a plan to raise the debt limit while George W. Bush was president, in protest at what he said was a lack of leadership.
"The president ... regrets that vote and thinks it was a mistake," Carney said.
"He realizes now that raising the debt ceiling is so important to the health of this economy and the global economy that it is not a vote that, even when you are protesting an administration’s policies, you can play around with.
"You need to take very seriously the need to raise the debt limit so that the full faith and credit of the United States government is maintained around the globe."
Carney also quoted the head of JPMorgan Chase, CEO Jamie Dimon, as saying that anyone who failed to raise the debt limit would be "crazy" and any move of that kind would have "catastrophic and unpredictable" results.
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American Depression Era Bread line, circa 1937 - Coming to a town near you?