Federal Reserve Chairman Ben Bernanke said Congress must raise the debt ceiling and not use a potential U.S. debt default as leverage to get spending cuts.
"Raising the debt ceiling, which Congress has to do periodically, gives the government the ability to pay its existing bills -- it doesn't create new deficits, it doesn't create new spending," Bernanke said at the University of Michigan.
"Not raising the debt ceiling is sort of like a family, which is trying to improve its credit rating, saying, 'Oh, I know how we can save money -- we won't pay our credit card bills,'" he said.
Bernanke, a registered Republican first appointed as Fed chairman by President George W. Bush in 2006, said policymakers face "difficult and contentious decisions" about spending and tax policies. But those decisions should not be made "in the context of the debt ceiling," he said.
"The right way to deal with this problem is for Congress to do what it is supposed to do and what it needs to do," he said.
Bernanke's comments came a few hours after President Barack Obama at the White House demanded Congress unconditionally increase the legal limit on the government's authority to borrow money to pay its bills, while Republican leaders on Capitol Hill insisted they would require government-spending cuts in exchange for a debt-limit increase.
"America cannot afford another debate with this Congress about whether or not they should pay the bills they've already racked up," Obama said in his final scheduled White House news conference before his second inauguration next week.
He said not raising the $16.4 trillion debt limit would be "irresponsible" and "absurd." And he warned Republicans against using the debt ceiling as leverage in the spending debate.
"They will not collect a ransom in exchange for not crashing the American economy," he vowed. "The financial well-being of the American people is not leverage to be used. The full faith and credit of the United States of America is not a bargaining chip."
But the top Republican leaders of the House and Senate immediately rebuffed Obama's remarks.
"The American people do not support raising the debt ceiling without reducing government spending at the same time," House Speaker John Boehner, R-Ohio, said in a statement. "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."
Senate Minority Leader Mitch McConnell, R-Ky., said in a separate statement, "The president and his allies need to get serious about spending, and the debt-limit debate is the perfect time for it."
U.S. Treasury Secretary Tim Geithner added to the pressure by telling congressional leaders his department expected the United States to hit the debt limit between mid-February and early March.
His time frame followed a study released by the Bipartisan Policy Center last week that suggested the limit could be reached as early as Feb. 15.
"Treasury would be left to fund the government solely with the cash we have on hand on any given day," Geithner said in a letter. This would force the department to choose who to pay among creditors, federal contractors, veterans, Social Security and Medicare beneficiaries and others with claims to federal dollars.
The U.S. government neared the borrowing limit Dec. 31, 2012, and the Treasury Department has been using special maneuvers, such as halting payments to federal pensions, to buy additional time.
Senate Democratic leaders have said they plan to introduce a bill early next month that would let the president raise the debt ceiling on his own, now and in the future. House Republicans are widely expected to oppose that measure.
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