With the government closed and the U.S. staring at default, President Obama told the world for more than an hour Tuesday that America has been weakened domestically and globally.
The president talked about businesses cutting back and workers being furloughed. He spoke of a “cloud of uncertainty” over the U.S. economy and its financial markets, and warned that the Treasury Department is exhausting its emergency “contingencies” to pay the nation’s bills.
Having missed two summits in Asia this week because of the shutdown, Mr. Obama said China could benefit from Washington’s deadlock. He even used the same phrase as a top Chinese official to describe his nation’s concerns as the top U.S. creditor: “The clock is ticking.”
“It hurts our credibility around the world,” Mr. Obama said. “It makes it look like we don’t have our act together.”
Mr. Obama’s message was intended to pressure and to shame House Republicans, especially Speaker John A. Boehner, into reopening the government and raising the nation’s borrowing limit without conditions. He also wanted to refute some lawmakers, particularly in the GOP, who believe a government default would not be calamitous in the short term.
Indeed, late in the day Sen. Tom Coburn, Oklahoma Republican, took to the Senate floor to say that if the government did default or halt payments to Social Security beneficiaries, it would be because Mr. Obama chose that route, not because the borrowing limit forced it.
“Only somebody who wants to hurt us further would play the political game if we ever got there … to not pay Social Security or not pay Medicare,” Mr. Coburn said. “We have more than enough money to do that.”
One result of Mr. Obama’s news conference was the startling spectacle of the president of the United States talking gloom and doom about his own country at length for all to hear — allies, enemies, investors and entrepreneurs alike.
It’s doubtful that the president reassured bondholders when a reporter asked him directly whether foreign creditors must be paid first in the event of a U.S. default. The president, a graduate of Harvard Law School and the veteran of another default standoff in 2011, appeared not to know the answer and feared he would say something wrong.
“I’m going to let Jack Lew, the secretary of the Treasury, make a formal presentation on Thursday before the Senate committee because this is obviously sensitive enough and I think people would be playing close enough attention that details count,” Mr. Obama said.
In 2011, Treasury was looking at prioritizing interest payments on government debt before paying other bills, but lawmakers reached a deal before any plan had to be implemented.
With no action in Congress, and Mr. Obama tossing around words like “catastrophe,” financial markets plummeted Tuesday. The Dow Jones Industrial Average dropped more than 1 percent.
Of course, the president blamed Mr. Boehner.
“We’re not going to calm creditors until they see Speaker Boehner call up a bill that reopens the government and authorizes the secretary of Treasury to pay our bills on time,” Mr. Obama said. “And until they see that, there’s going to be a cloud over U.S. economic credibility.”
Mr. Boehner, in his own news conference, replied that presidents have regularly negotiated with Congress over debt increases and spending, and he said this time will be no different.