President Obama's top economic advisor, Austan Goolsbee, warned today against "playing chicken" with raising the country's debt ceiling, saying it would cause "a worse financial economic crisis than anything we saw in 2008."
"This is not a game. The debt ceiling is not something to toy with," said Goolsbee, the chairman of the White House Council of Economic Advisers, in an exclusive interview on "This Week."
"If we hit the debt ceiling, that's ... essentially defaulting on our obligations, which is totally unprecedented in American history," he said. "The impact on the economy would be catastrophic."
Congress raised the debt ceiling to $14.3 trillion last February, but the federal debt is now at $13.9 trillion, meaning the ceiling will need to be raised again this spring to avoid pushing the country into default.
Some conservatives in Congress, especially new Tea Party members, have said they will vote against raising the debt limit again, saying government should drastically cut spending instead.
"I don't see why anybody's talking about playing chicken with the debt ceiling," Goolsbee said. "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."
Incoming Republican House Speaker John Boehner has said he will work to convince new members to vote to raise the limit, saying it will be "the first really big adult moment" for the new Republican majority.
"It's going to be difficult, I'm certainly well aware of that," the Ohio Republican told The New Yorker in December. "But we'll have to find a way to help educate members and help people understand the serious problem that would exist if we didn't do it."
Goolsbee said Obama will propose "tough choices" on tackling the nation's spending and deficit problems in his soon-to-be released budget for the next fiscal year
"We are going to have to make in the medium run a series of tough choices, and the president's not afraid to do that," Goolsbee said, though he did not outline any specific new cuts.
After more than two years of economic turmoil, 2010 ended with glimmers of positive news for the economy. Holidays sales were up 5.5 percent over 2009, beating expectations. Stocks were also headed in the right direction, with the Dow ending the year up 11 percent and the Nasdaq almost 17 percent.
But the unemployment rate has remained stuck at 9.8 percent, only slightly better than it was at this time last year.
"Coming out of the worst financial crisis of our lifetimes, it's always a messy, bumpy road to get out of that," Goolsbee said. "You're starting to see encouraging signs, I'd say.
"We've just got to juice this, and pump it up, and get it going faster, but that's clearly the direction that we're headed," Goolsbee added, saying that focus "on investment, on exports, and on innovation" are the best ways to promote growth in the private sector and generate new jobs.