The White House's debt limit talking points 

Via Sam Stein at The Huffington Post, here are the talking points that the White House is circulating to Democratic allies:

Talking Points: America Living up to its Obligation

  • Our nation must live up to its obligations. It is critically important that Congress act as soon as possible so that the full faith and credit of the United States is not called into question.
  • Failure to do so would force the United States to default on its legal obligations, such as payments to our servicemembers, citizens, investors, and businesses. This means the United States would need to stop, limit, or delay payment on military salaries, Social Security and Medicare, tax refunds, contractual payments to businesses for goods and services, and payments to our investors.
  • This would be an unprecedented event in American history. This would create catastrophic damage to our economy, significantly reducing growth and increasing unemployment.
  • Investors in the United States and around the world would be less likely to lend us money in the future. And those investors who still choose to purchase Treasury securities would demand much higher interest rates, increasing the cost of paying interest on the national debt and worsening our nation’s fiscal challenges.
  • America failing to meet its obligations would not only increase borrowing costs for the Federal government, it would impact families, businesses and local governments.
    • Treasury securities set the benchmark interest rate for a wide range of credit products, including mortgages, car loans, student loans, credit cards, business loans, and municipal bonds.
    • An increase in Treasury rates would make it more costly for a family to buy a home, purchase a car, or send a child to college. It would make it more expensive for an entrepreneur to borrow money to start a new business or invest in new products and equipment. We simply can’t afford this.
  • America failing to live up to its obligations would also lead to a sharp decline in household wealth. Higher mortgage rates would depress an already fragile housing market, causing home values to fall.
  • Additionally, this would substantially reduce the value of the investments – including Treasury securities – held in 401(k) accounts and pension funds, which families depend on for their retirement security.
  • As the recent financial crisis demonstrated, a severe and sudden blow to confidence in the financial markets can spark a panic that threatens the health of our entire global economy and the jobs of millions of Americans.

Two things jump out: First, the not so subtle reference to the 2008 financial crisis. This is not the first time the White House has linked the two, but if there was even a remote possibility of a financial meltdown repeat, the White House would be the last entity to mention the possibility. Second, zero mention of any solutions for deficits, long- or short-term.

Obama has already admitted he will have to cut spending in order to get the debt limit raised. This statement provides no guidance on how he think a deal will get down.

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