President Barack Obama stressed Friday that the US fiscal problems were not as bad as those threatening the stability of the eurozone, saying fixing the deficit does not require “anything radical.”
“Contrary to what some folks say, we’re not Greece. We’re not Portugal,” he said, discussing the political battle over the US government deficit.
While deeply indebted Greece, Portugal and Ireland are being propped up by massive bailouts from the European Union and International Monetary Fund — and are expected to need still more money — Obama said the United States could solve its own problems with his long-term deficit reduction plan.
“We simply need to make these tough choices and be willing to take on our (political) bases. And everybody knows it,” he said.
Obama admitted the fundamental underlying problem “that our debt and deficits are too big” — the same problem of the weak eurozone periphery countries.
But he said there are clear and viable options for fixing the problem over the long term, that only require political will from both political parties.
He also though recognized that the United States was, like Greece and Portugal, facing a risk of defaulting on its debt, which he said would lead to economic “Armageddon.”
There is a crucial difference: Greece is most at threat of defaulting because its finances have deteriorated so much it cannot raise any more money at reasonable rates on the commercial debt market.
In comparison, the United States still enjoys very cheap borrowing rates, and can easily borrow more over the medium term.
But it could be forced to default if the Congress does not increase the statutory debt ceiling by about August 2.
Republicans in Congress are refusing Obama’s entreaties to raise the ceiling unless they can get a deficit reduction plan that meets their standard of all spending cuts and no tax increases.