AFP, Reuters/Washington


President Barack Obama warned of a new economic crisis yesterday and said global stock markets would go “haywire” unless Republicans in Congress agree to raise the US sovereign debt ceiling.
“To even entertain the idea of this happening, of the US of America not paying its bills, it is irresponsible, it is absurd,” Obama said in repeating his demand for a debt limit rise.
“We are not a deadbeat nation,” the president said in his final press conference of his first White House term.
“While I’m willing to compromise and find common ground over how to reduce our deficits, America cannot afford another debate with this Congress about whether or not they should pay the bills they’ve already racked up.”
Congressional refusal to raise the debt limit beyond its current level of $16.4tn could delay payment of Social Security checks and veterans benefits, paychecks to troops, air traffic controllers, and the honoring of contracts with small businesses.
“Investors around the world will ask if the US of America is in fact a safe bet,” he added.  “Markets could go haywire, interest rates would spike for anybody who borrows money. It would be a self-inflicted wound on the economy.”
The US is expected to run up against its current debt limit by the end of February, and Obama lay any potential solution at the foot of the Republican House leadership, some of whom have demanded that any rise in the debt ceiling be matched dollar-for-dollar by deep government spending cuts.
“They can act responsibly, and pay America’s bills, or they can act irresponsibly and put America through another economic crisis,” Obama said.
“But they will not collect a ransom in exchange for not crashing the American economy.”
Obama’s blunt warning came amid reports that Republicans in the House of Representatives are considering letting the US government go into default unless Obama agrees to dramatic federal spending cuts.
Meanwhile, a top Federal Reserve official said yesterday that worries over whether and how US lawmakers will take the hard steps needed to put the nation on a sustainable fiscal path are top of mind as US central bankers weigh monetary policy
“We make up our little short list, what are the biggest things that keep us up at night,” John Williams, president of the San Francisco Federal Reserve Bank, said at a technology-focused conference in Half Moon Bay, California.
“Generally, Eurpoe and Asia have been two, three, four, somewhere along those lines; right now it’s the fiscal cliff.”
Williams said he was frustrated that lawmakers reached an agreement only on the “easiest” of challenges as they headed off a sweep of tax rises that otherwise would have come into effect this year.
Hard and unpopular choices on government spending are still ahead, he said.
Williams also said that while he believes the Fed’s easy monetary policies have been effective in boosting growth, they have not been as effective as otherwise, in large part because credit is too tight for some borrowers and because of various unexpected shocks that have hit the economy.