Friday, July 15, 2011

Debt Default Could Mean "Tax Increase On Everybody"

WASHINGTON -- President Barack Obama may have just put the consequences of debt default in terms most Americans can understand.

During a Friday press briefing, the president warned that failure to raise the debt ceiling in time could mean an increase in interest rates, which "is effectively a tax increase on everybody."

"Suddenly, whether you’re using your credit or you’re trying to get a loan for a car or a student loan, businesses that are trying to make payroll, all of them could end up being impacted as a consequence of a default," Obama said.

The president's warning taps directly into the GOP argument for not accepting a deal to date: Republicans have refused to sign onto any final package that includes tax increases. Now Obama is making the case that widespread tax increases could occur if they don't make a deal.

A senior Senate GOP aide scoffed at the president's latest message since, according to Republicans, Obama's push for closing tax loopholes in a final deal is akin to tax hikes.

"So, tax increases are bad now?" asked the aide.

Negotiators still don't have a deal and are inching closer to the August 2 deadline, the day the government is expected to officially run out of money to pay its bills. Obama said he is still pushing for a "big deal" -- or a roughly $4 trillion debt reduction plan -- but that it comes down to Republicans being willing to give ground on allowing for new revenue.

"We have a chance to stabilize America’s finances for a decade, for 15 years, or 20 years," Obama said. "If we’re wiling to seize the moment."