Obama: Not raising debt limit would be 'absurd'

(CBS NEWS) -- President Obama on Monday shot down Republican threats to let the federal government default on its loans, saying, "To even entertain the idea of this happening, of the United States of America not paying its bills, is irresponsible. It's absurd."

"We've got to pay our bills," Mr. Obama said in a White House news conference. He reiterated that while he is willing to compromise over plans for deficit reduction, he will not accept using the debt limit as a bargaining chip.

"They will not collect a ransom in exchange for not crashing the American economy," he said of Republicans. "The full faith and credit of the United States of America is not a bargaining chip."

Within a matter of weeks, Washington is likely to be embroiled in three fiscal debates: The $16.4 trillion debt limit the Treasury Department is expected to hit by mid-February or early March, the $1.2 trillion in "sequester" cuts set to go into effect on March 1, and the expiration of the "continuing resolution," or federal government funding on March 27.

The risk of failing to address any of these issues is high, but failing to raise the debt limit poses the greatest threat: By failing to do so, Congress would risk letting the government default on its loans, which economists say would have disastrous consequences.

Mr. Obama quoted House Speaker John Boehner on the issue, who last year said letting the government default would be "a financial disaster not only for us, but for the worldwide economy."

The president ran through a list of the economic consequences of default, noting, "Social Security checks and veterans' benefits will be delayed. We might not be able to pay our troops or honor or contracts with small business owners. Food inspectors, air traffic controllers, specialists who track down loose nuclear materials wouldn't get their paychecks. Investors around the world will ask if the United States of America is, in fact, a safe bet. Markets could go haywire, interest rates would spike for anybody who borrows money, every homeowner with a mortgage, every student with a college loan... It would be a self-inflicted wound on the economy, it would slow down our growth might tip us into recession, and ironically, might increase our deficit."

In spite of the president's warnings -- and the potential economic consequences -- Republicans say they're ready to use the threats of defaulting or a government shutdown to win significant spending cuts in the next round of negotiations. Ideally, the GOP wants dollar-for-dollar cuts in exchange for raising the debt limit.

"In another month from now, all these tea party people and others are going to be together and using that as the hammer to get that done, and I feel very good about that," Sen. Jim Inhofe, R-Okla., told CBSNews.com about the threat of defaulting.

While many Republicans are willing to use the threat of default as leverage, even more are reportedly willing to let the government shut down.

"I think it is possible that we would shut down the government to make sure President Obama understands that we're serious," Rep. Cathy McMorris Rodgers, R-Wash., the fourth ranking Republican in the House, told Politico. "We always talk about whether or not we're going to kick the can down the road. I think the mood is that we've come to the end of the road."