President Barack Obama just finished an extended press avail at the White House, during which members of the press asked very few questions that challenged any of his positions. When he was asked about the lack of progress on debt ceiling discussions, the president suggested that any hint of a default could impact the financial markets.
REPORTER: “You laid out the economic consequences of the default, but if we were to get to that point, would you prioritize and pay bond holders first to maintain [inaudible] — and how would you go ahead and make that determination?”
OBAMA: :”I’m going to continue to be very hopeful that Congress does not put us in that position. And I think if people understand what the consequences are, they will set that potential scenario aside. I do know there have been some who have said that if we just pay bond holders, just pay people who bought Treasury bills, that we really won’t be in default because those interest payments will be made and to them what i have to remind them is, we have a lot of other obligations, not just people who pay Treasury bills. We have senior citizens counting on their Social Security arriving on time. We have veterans who are disabled who are counting on their benefits. We have companies who are doing business for our government and for our military that have payrolls that they have to meet. And if they do get not get paid on time, they may have to layoff workers. All of those folks are potentially affected if we are not able to pay all of our bills on time. What’s also true if the markets are seeing we’re not paying all of our bills on time, that will affect our creditworthiness, even if some people are being paid on time. (emphasis added)
It’s ironic for the president to mention companies that work with and depend on the federal government meeting their obligations. Companies like Recreation Resource Management work with the federal government to manage hundreds of parks on federal land. President Obama has used the shutdown to close those parks, throwing hundreds of workers out of their jobs and jeopardizing the survival of those companies.