Obama: Debt limit fight imperils elderly's checks

WASHINGTON (AP) — Declaring "we are not a deadbeat nation," President Obama warned on Monday that Social Security checks and

veterans' benefits will be delayed if congressional Republicans fail to increase the government's borrowing authority in a

looming showdown over the nation's debt and spending.

Obama said he was willing to negotiate

deficit reduction with GOP leaders but insisted that those talks be

separate from decisions

to raise the $16.4 trillion debt ceiling and avert a possible

first-ever national default.

"They will not collect a ransom in exchange

for not crashing the American economy," Obama said in a news conference

one week

before he is sworn in for a second term. "What I will not do is to

have that negotiation with a gun at the head of the American

people."

Bitter brinkmanship between the White House and congressional Republicans over spending has become a defining event over the

past four years, testing both Obama's leverage and his resolve at different moments of his presidency. House Speaker John

Boehner brushed off Obama's insistence on separating the debt ceiling from negotiations over spending cuts.

"The American people do not support raising

the debt ceiling without reducing government spending at the same time,"

Boehner

said. "The consequences of failing to increase the debt ceiling

are real, but so, too, are the consequences of allowing our

spending problem to go unresolved.

Underscoring the urgency, Treasury Secretary

Timothy Geithner said in a letter to Boehner on Monday that the

government will

exhaust its borrowing limit as soon as mid-February, earlier than

expected. The Treasury has been using bookkeeping maneuvers

to keep from surpassing the debt ceiling, but Geithner said those

measures will be exhausted by mid-February to early March.

In addition to noting possible effects on older Americans and veterans, Obama recited a litany of possible consequences if

Congress fails to raise the debt ceiling, including sending the economy back into recession.

"We might not be able to pay our troops, or

honor our contracts with small business owners," he said. "Food

inspectors, air

traffic controllers, specialists who track down loose nuclear

materials wouldn't get their paychecks. Investors around the

world will ask if the United States of America is in fact a safe

bet. Markets could go haywire, interest rates would spike

for anybody who borrows money. Every homeowner with a mortgage,

every student with a college loan, every small business owner

who wants to grow and hire."

At this moment, the government faces three

looming deadlines: The debt limit must be raised soon to meet spending

obligations

and prevent a first-ever default, a series of across-the-board

spending cuts is to kick in on March 1, and funding for most

government programs will run out on March 27.

After Obama won tax rate increases for wealthier Americans during budget negotiations last month, Republicans became doubly

determined to win spending cuts. They see the confluence of events ahead of April 1 as their best opportunity.

Just weeks from hitting the first of the

deadlines, the two sides are neither on the same page nor pursuing a

common approach.

In 2011, Obama and Boehner at least started off agreeing on the

premise that the increase in the debt limit be matched dollar-for-dollar

with deficit cuts, spread out over a decade. Obama ultimately won a

$2.1 trillion debt increase, but only after agreeing to

an equal amount of spending cuts over 10 years.

This time, White House officials believe the president has a stronger hand, having won re-election and, at least partially,

the tax increases on which he had campaigned.

Eager to avoid blame for a default or for missed payments to seniors, some Republicans are getting ready to insist on certain

payment priorities by the Obama administration if the debt ceiling is not raised in a timely manner.

Even without additional borrowing authority, the government would continue to receive tax revenue, but hardly enough to keep

up with the bills.

Sen. Patrick Toomey, R-Pa., says he will

introduce legislation next week that would require the government to pay

interest

on the debt as well as Social Security benefits and wages for

active duty members of the military if the borrowing limit is

not raised.

"Because the people who want to keep spending as usual and don't want to negotiate some spending reductions are out there

propagating this myth that somehow failure to raise the debt ceiling would result in a default, I felt like it's necessary

to demonstrate and, in fact I prefer to codify, the alternative," Toomey said in an interview.

Congressional Democrats have recently urged

the president to lift the debt limit unilaterally. He said — as he has

before

— that he won't do it, that Congress has voted for the spending

that resulted in federal borrowing, and should now agree to

pay the bill.

"There are no magic tricks here," Obama said Monday. "There are no loopholes. There are no, you know, easy outs."

Obama noted that combined with other legislation he signed earlier in his term, he and Congress have reduced deficits by about

$2.5 trillion over a decade, short of the $4 trillion he said is necessary to get them down to a manageable size.

He insisted that in negotiating deficit reductions, both spending limits and tax revenue increases need to be on the table.

Aides have said that closing loopholes and placing limits on deductions could generate about $600 billion in new revenue.

He added that he is "open to making modest adjustments to programs like Medicare to protect them for future generations."

One option for Boehner is to package a debt limit increase together with a full catalog of spending cuts and try to pass it

through the House. That could prove enormously challenging since he would have to accomplish the feat exclusively with GOP

votes — and some conservative hard-liners simply refuse to approve any debt increase.

Boehner has made it clear that he's eager to avoid a first-ever default on U.S. obligations — even if some Republicans aren't

afraid of the idea.

In one sign of flexibility, a Boehner

spokesman says that though there is the so-called Boehner Rule requiring

$1 in spending

cuts for every $1 in increased authority to issue government debt,

the speaker is willing to apply it more leniently to include

savings from "reforms" to entitlement programs like Medicare and

Social Security that accrue over the long term.

Obama has his doubters, who note that he has compromised before in the face of last-minute deadlines.

Asked during the news conference how steadfast he was, Obama replied: "We've got to break the habit of negotiating through

crisis over and over again. Now is as good a time as any, at the start of my second term. Because if we continue down this

path, then there's really no stopping the principle."