Fox's Payne Tries To Blame Economic Consequences Of Debt Ceiling Debate On Obama
Blog ››› ››› THOMAS BISHOP
Fox's Charles Payne attacked President Obama for stoking fears about the debt ceiling and blamed him for the economic consequences. But experts agree that Obama's concerns are justified, as failing to raise the debt limit could lead to higher deficits, and higher interest rates, which could have dire consequences for the economy.
During a January 14 press conference, President Obama warned that failure to raise the debt ceiling "would be a self-inflicted wound on the economy."
On the January 14 edition of Fox News' America Live, Fox Business contributor Charles Payne responded by claiming the debt ceiling debate would not be having an effect on the economy if the president "weren't going on a cross country tour, if you weren't doing these -- if you weren't hyping it." Payne went on to accuse Obama of "helping stoke the flames" of economic uncertainty by informing people about the debt ceiling:
But the economic consequences of the debt ceiling debate are real, not a consequence of Obama discussing it. Federal Reserve chairman Ben Bernanke pointed out that the government could be forced to pay higher interest rates on its debt due to the "perception of higher riskiness and uncertainty associated with funding the government":
First, the Fed chief said a new financial crisis would be created as firms that rely on receiving interest and principle from the government are unable to make their own payments. "That would probably cascade through the financial markets," he said.
Then, there would be a "massive loss of confidence" in U.S. Treasury securities, the deepest, most liquid market in the world.
Bernanke said even if the U.S. failed to meet its debt payment deadline for 20 minutes and the government avoided the most serious harmful impacts, the interest rates the U.S. pays on its debt would still likely rise with the perception of higher riskiness and uncertainty associated with funding the government.
In a fact sheet on the debt ceiling, the Treasury Department explained that questions about the "full faith and credit" of the government could lead to "the loss of millions of American jobs" among other economic consequences:
If Congress fails to increase the debt limit, the government would have to stop, limit, or delay payments on a broad range of legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and many other commitments. Defaulting on those legal obligations would cause severe hardship for American families. Additionally, it would call into question the full faith and credit of the United States government - a pillar of the global financial system. The ensuing financial crisis from a default would have catastrophic economic consequences, potentially including the loss of millions of American jobs. And it would lead to higher borrowing costs, reduced retirement savings, and lower home values for families across the nation.
In a May 2011 policy brief, the Center for American Progress' Christian Weller pointed out that higher interest rates would also have an effect on the fragile housing market, which could "spark a return of the economic pain of the past few years for many families as foreclosures would remain at or near record highs":
The connection between the debt ceiling, the housing market, the construction industry, and the broader economy is the rate of interest paid on U.S. Treasury bonds and home mortgage rates. Failing to raise the federal debt ceiling, which is the maximum amount that the federal government can borrow without additional congressional action, would cause interest rates to climb, perhaps sharply, and they would remain higher than they otherwise would. Mortgage rates, among other interest rates, would rise alongside interest rates on U.S. Treasury bonds, making homes less affordable and depressing house sales and prices. The housing market double-dip decline that many fear would quickly become a reality, destroying even more of families' home equity, slowing the economic recovery, and cutting much-needed jobs.
Despite the clear economic consequences, Fox News hosts have continued to urge Republicans not to raise the debt ceiling.