President Barack Obama and Senate Majority Leader Harry Reid today said the nation is on track to default on its debt Monday, but White House officials are also creating a bit of maneuvering room for themselves by sometimes highlighting the distinction between borrowing authority and default.
White House spokesman Jay Carney cited that distinction yesterday at the daily White House press conference, when he told reporters that Congress’ refusal to raise the debt ceiling “would create a situation where for the first time in our history we have lost our borrowing authority and risk default.”
The distinction is significant, because the federal government will hit its $14.2 trillion credit-card limit Monday, but won’t actually default until it fails to juggle its varied tax income and its diverse bills over the following few days or weeks.
Federal agencies have many economic levers that can be used to temporarily juggle the expenses, to pay each day’s bills, and to discourage Wall Street’s rating agencies from downgrading the nation’s triple-A credit rating, even if Congress does not raise the debt ceiling for several days after Aug. 2.
A credit downgrade could be disastrous for Obama, because it would damage his standing among swing voters and further choke the U.S. economy by driving up interest rates and unnerving investors.
New and revised data released Friday show the already-stalled economy slowing to a crawl, down from 1.9 percent growth to only 0.4 percent in the first quarter, and down from a predicted 1.9 percent to only 1.3 percent in the second quarter.
This sour economy is already threatening Obama’s re-election chances. The Pew Research Center released the results of a poll yesterday showing that 54 percent of swing-voting independents disapprove of Obama’s performance. (RELATED: After long night in the Capitol, vote on Boehner’s bill put off until Friday)
Obama and Reid are largely ignoring that distinction as they push Republicans to accept Reid’s draft bill, which would raise the debt ceiling enough to cover federal expenses until 2013 and cut spending by several hundred billion dollars over the next decade.
“A vote against this compromise is a vote against the full faith and credit of the United States,” Reid declared in a speech from the Senate floor. “The last train is leaving the station. This is our last chance to avert default.”
Reid said he would introduce his bill in the Senate today.
Obama used the same tactic in a Friday morning speech when he tried to pressure Republicans to accept the draft debt-ceiling bill developed by the Senate’s Democratic leader, Sen. Harry Reid. “If we don’t come to an agreement, we could lose our triple-A credit rating,” he said, calling on his supporters to press Congress to back a bill that would allow the federal government’s spending to continue past the 2012 election. “We are running out of time,“ Obama said.
Senate Minority Leader Sen. Mitch McConnell responded to Reid by asking Democrats to support a plan that could be approved by the Democratic-run Senate and the Republican-run House. “How about a plan from Democrats in Washington that can pass both chambers?” McConnell asked. “I would suggest to my [Democratic] colleagues they take their responsibilities seriously.
“Republicans have been doing the hard work of governing. It is about time our Democratic colleagues joined us.”