White House Talking Points Invoke '08 Crisis As Possible Debt Ceiling Outcome

WASHINGTON -- With the U.S. government officially hitting its debt ceiling on Monday, the Obama administration is distributing a set of talking points emphasizing the “panic” and “catastrophic” outcome that would result from a full-on default.

The talking points, sent over by a Democratic source, strike the same dire tone that administration officials have done for the past few weeks, if not months. The one noteworthy hook may be the invocation of the 2008 financial crisis, which the White House holds up as a possible template for what would happen should Congress not pass a bill raising the ceiling from its current level.

Below are the talking points in full:

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.

The reference to the '08 crisis isn't entirely new. Treasury Secretary Timothy Geithner made a similar point in a letter he sent to Sen. Michael Bennet (D-Colo.) late last week. Tactically, however, it's an interesting, if not obvious, move: pointing to a fresh, tangible moment rather than esoteric economic arguments, as a way of moving public opinion.

Earlier on Monday, White House Press Secretary Jay Carney told reporters that the President had been keeping in touch with the members of Congress who are attempting to forge an agreement on raising the debt limit. He wouldn’t offer specific details as to the calls President Obama has made but accused those lawmakers who downplaying the significance of a default as “whistling past the graveyard.”

“It is a foolish thing to suggest that we could somehow as the United States of America default on our obligations and that it would not have seriously negative consequences if we suddenly stop paying our bills on a third of our obligations,” said Carney.