May 18th, 2011
04:11 PM ET
WASHINGTON (CNN) - Obama administration officials declared Wednesday that there is no fallback plan if Congress fails to lift the nation's $14.3 trillion debt limit by Aug. 2, and they warned that inaction could spark a series of catastrophic events.
"There really is no alternative to raising the debt limit," one senior administration official said at a briefing with reporters. "There is no plan that can preserve our credit worthiness."
A second senior administration official also pushed back on the claim by Sen. Pat Toomey (R-Pa.) that the administration is using "scare tactics" on the issue and asserted that a failure to raise the debt ceiling would be “disruptive” but not "catastrophic" to the economy.
This second senior official said the White House is closely monitoring the markets already. So far "we are not seeing signs of anxiety and concern" because Wall Street has seen Congress fight about the debt limit before only to see both parties come together in the end without the U.S. government defaulting on its debts.
But this second senior official warned that failing to raise the debt ceiling could in fact be catastrophic, especially after a reporter compared the current situation to the fall of 2008, when the markets were rattled after the House of Representatives initially failed to pass the bank bailout during the financial crisis.
Asked specifically if the administration is using that episode to lobby for support to raise the debt ceiling, this second senior official said flatly: "I never remind anyone of the TARP vote" in reference to how disastrous that episode turned out to be.
To buttress their point that the debt ceiling must be raised, administration officials are using the words of Treasury Secretary Tim Geithner - as well as one of his predecessors from the Reagan administration.
In a May 13 letter to Sen. Michael Bennet (D-Colo.), Geithner warned that "a default would inflict catastrophic, far-reaching damage on our nation's economy, significantly reducing growth, and increasing unemployment."
Administration officials also released a July 8, 1987, letter from then-Treasury Secretary James Baker urging the Democratic Congress to raise the debt ceiling - or else.
"I cannot overemphasize the damage that would be done to the United States' credit standing in the world if the government were to default on its obligations, nor the unprecedented and catastrophic repercussions that would ensue," Baker wrote. "Market chaos, financial institution failures, higher interest rates, flight from the dollar and loss of confidence in the certainty of all United States government obligations would produce a global economic and financial calamity. Future generations of Americans would have to pay dearly for this grave breach of a 200-year old trust."