Some Republicans OK with short-lived debt default

U.S. Rep. Paul Ryan (R-WI), chairman of the House Budget Committee, holds up a copy of the 2012 Republican budget proposal during a news conference April 5, 2011 on Capitol Hill in Washington, D.C.

JEREMY HOBSON: Well the Treasury Department says Congress has until August 2 to raise the federal debt ceiling or the U.S. will have to stop paying its creditors. There have been dire warnings about what would happen if the federal government defaults on its debt. But now, it seems more and more Republicans are saying publicly that a short-lived default wouldn't be so bad.

Marketplace's Amy Scott reports.


AMY SCOTT: Republicans say failing to raise the U.S.'s $14.3 trillion borrowing limit wouldn't be catastrophic. Some like Minnesota Governor Tim Pawlenty -- who's running for President -- say we can put paying creditors ahead of domestic spending.

Other Republicans, including Paul Ryan -- head of the House Budget Committee -- say a short-term default wouldn't lead to calamity. Ryan speaking to CNBC.

PAUL RYAN: If a bondholder misses a payment for a day or two or three or four -- what is more important is you are putting the government in a materially better position to better pay its bills going forward.

Jack Albertine of forecasting firm Albertine Enterprises says the idea does seem to be catching on.

JACK ALBERTINE: I think it's more out of frustration and out of almost desperation to find an end game that this idea will be gaining traction.

That's not to say Republicans are dismissing a compromise entirely. House leadership is taking part in bi-partisan debt ceiling talks with Vice President Joe Biden. Tomorrow, the two sides meet again.

I'm Amy Scott for Marketplace.

About the author

Amy Scott is Marketplace’s education correspondent covering the K-12 and higher education beats, as well as general business and economic stories.

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