I'm not sure why it would be Catastrophic. Why did we establish a debt ceiling in the first place if it can be exceeded so easily and why is holding our indebtedness to a finite amount bad? Can we really not cut any government spending?
USA Today - Jan 02, 2011
Obama aide: Refusal to raise debt ceiling would be 'catastrophic'
The chairman of President Obama's Council of Economic Advisers said today it would be "insanity" for Congress to refuse to lift the nation's debt ceiling and that inaction would be "catastrophic" for the nation's financial recovery.
"This is not a game," CEA chairman Austan Goolsbee told Jake Tapper on ABC's This Week. "The debt ceiling is not something to toy with."
Goolsbee also discussed efforts to create jobs and generate economic growth. The debt ceiling discussion begins shortly after the 4:35 mark of the video.
The United States is about $400 billion away from hitting the $14.3 trillion debt ceiling, and a congressional vote on whether to raise that limit should come this spring. Some Republicans have called for keeping the ceiling as a way to force cuts in federal spending.
Goolsbee said that would lead to a default on U.S. obligations, "which is totally unprecedented in American history."
That would create a string of other problems, Goolsbee said:
The impact on the economy would be catastrophic. I mean, that would be a worse financial economic crisis than anything we saw in 2008. As I say, that's not a game. I don't see why anybody's talking about playing chicken with the debt ceiling.
If we get to the point where you've damaged the full faith and credit of the United States, that would be the first default in history caused purely by insanity ... There would be no reason for us to default, other than that would be some kind of game.
We shouldn't even be discussing that. People will get the wrong idea. The United States is not in danger of default ... We do not have problems such as that. This would be lumping us in with a series of countries through history that I don't think we would want to be lumped in with.
(Posted by David Jackson)