The Republican members of the Senate Finance Committee fired off a missive to President Barack Obama Wednesday morning warning against talking up the risks of default because it could spook the markets.
The GOP senators, led by Finance ranking member Orrin G. Hatch of Utah and John Thune of South Dakota, directed their letter at comments the president made last week in an in interview with CNBC.
"Any talk of default is counterproductive. It creates greater uncertainty and drives policymakers further away from reaching a bipartisan, common-sense agreement. While some may perceive talk of default as just poorly timed political rhetoric, it is possible that our financial markets could continue to take such comments at face value," the Finance Republicans wrote. "As you know, this could have negative consequences on millions of families who have made prudent investments and could impact America’s ability to finance its debt at the lowest possible cost to taxpayers."
That message could, of course, be delivered to lawmakers and commentators on both sides of the aisle as Oct. 17 approaches. Finance Chairman Max Baucus, D-Mont., and Majority Leader Harry Reid, D-Nev., introduced a measure late Tuesday that would suspend limits on borrowing until the end of 2014.
At that point, the debt limit would be adjusted upward to reflect total borrowing (meaning that the Treasury Department could buy additional time into 2015 through the use of so-called extraordinary measures).
A first test vote to limit debate on taking up the Baucus-Reid plan could come Saturday, with Reid moving through the procedural steps to tee up that vote. A number of Senate Republicans have already dismissed the bill as a political exercise.
The full text of the GOP letter appears below:
We were greatly disappointed to hear your recent comments to CNBC’s John Harwood that you believe that Republicans in Congress are willing to default on our debt obligations by not raising the statutory debt limit. Specifically, you stated that you recently told representatives from the financial sector visiting Washington that "they should be concerned" over a faction of Congress that is "willing potentially to default."
We are writing to express our concern that such comments are unproductive and misguided. Any statements by you or other senior administration officials – whether to Wall Street or Main Street – that express the belief that America will default on its debt are not only misleading in our view, but they threaten to destabilize financial markets and could raise borrowing costs for families and small businesses.
The assertion that Congressional Republicans are willing to default on our debt could not be further from the truth. Speaker Boehner and other House Republican leaders have stated repeatedly that America cannot and will not default on its debt obligations. As Senate Republicans, we affirm this view. Any talk of default is counterproductive. It creates greater uncertainty and drives policymakers further away from reaching a bipartisan, common-sense agreement. While some may perceive talk of default as just poorly timed political rhetoric, it is possible that our financial markets could continue to take such comments at face value. As you know, this could have negative consequences on millions of families who have made prudent investments and could impact America’s ability to finance its debt at the lowest possible cost to taxpayers.
Rather than stoking fears that could destabilize financial markets and hurt investors, we believe now is the time to make a significant down payment on addressing America’s long-term debt problems. Debt held by the public has increased by 90 percent over the past four and a half years and will continue to increase for the foreseeable future. As Congress and the executive branch have routinely done in the past, now is the time to work together on solutions that reduce our deficits and move our economy forward.
We agree with your other statements last week that we should focus on “creating jobs, encouraging growth, [and] dealing with our long-term debt issues.” We stand ready to work with you to find reasonable measures that begin to address America’s long-term fiscal imbalance as part of a solution to the current impasse.