Washington (AFP) – The “terrible” and “unthinkable” threat of a U.S. government default transfixed Washington Monday, as a standoff over raising the debt ceiling surmounted angst over a week-long government shutdown.
Republican House Speaker John Boehner sparked alarm after warning on Sunday that he would not allow Congress to raise the government’s borrowing limit by an October 17 deadline unless President Barack Obama climbs down and offers concessions.
The sense of building crisis over Washington’s financial paralysis was picked up in China, with Beijing warning that the United States must act quickly to establish the credibility of the dollar, the world’s major reserve currency.
Concern also spread to previously calm investors, with the Dow Jones Industrial Average down 134.22 points (0.89 percent) at 14,938.36, mirroring a downward trend on global markets sparked by anxiety over U.S. government paralysis.
The White House reacted sharply to Boehner’s remarks, warning Congress could trigger a disastrous default and shred Washington’s prized credit rating, as doomsday scenarios of default, once deemed unthinkable, appeared to grow in credibility.
The U.S. government will be barred from borrowing by October 17 unless the current $16.7 trillion debt ceiling is lifted.
In the resultant chaos, Washington would begin defaulting on its debts, global stock markets could plummet and the fragile world economy could take a hit it can ill afford.
Gene Sperling, Director of the National Economic Council, said Boehner’s comments were disappointing and warned Obama could not allow the House of Representatives to hold him hostage over raising the debt limit because it would set a dire precedent for future presidents.
“The president has made clear the era of threatening default has to be over,” Sperling said at a breakfast hosted by the Politico news organization.
“If we sanction that as a regular process, that will do great harm to our democracy, great harm to our economy, great harm to the full faith and credit of the United States,” he said, adding that a debt default would be “unthinkable.”
Obama is refusing to negotiate with Boehner on raising the debt ceiling, saying Congress has a duty to pay bills already run up by lawmakers.
Boehner told ABC News on Sunday that his Republican-controlled House would not raise U.S. borrowing authority without concessions from the White House.
“We’re not going to pass a clean debt limit increase,” Boehner said.
“The president is risking default by not having a conversation with us.”