President Barack Obama warned Congress on Monday that it must raise the debt ceiling or risk a "self-inflicted wound on the economy." Fed Chairman Ben Bernanke and Treasury Secretary Timothy Geithner also delivered ominous calls for action.
"We've got to stop lurching from crisis to crisis to crisis," Obama told reporters at the White House in the last news conference of his first term.
Hours later, Geithner said in a letter to Congress that even a brief default would be "terribly damaging." And Bernanke said "we're not out of the woods yet," despite the deal to avoid the "fiscal cliff." (Read More: Bernanke: 'Not Out of the Woods' Despite 'Cliff' Deal)
Senate Minority Leader Mitch McConnell said Republicans look forward to working with Obama on the debt in order to "do something about this huge, huge problem." But he and House Speaker John Boehner said increases in the borrowing authority must be accompanied by spending cuts, despite Obama's insistence that the two issues be dealt with separately.
Stocks closed narrowly mixed Monday. (Read More: Stocks Flat; Apple at $500)
Despite the resolution of the so-called fiscal cliff, new political confrontations loom between the Obama administration and congressional Republicans over budget and borrowing.
Republicans have reportedly indicated a willingness to allow a debt default or a government shutdown to force the Obama administration to accept deeper spending cuts than the White House would like.
(Read More: Did Obama Just Take Default Off The Table?)
Obama insisted that the debt ceiling must be raised so the country can pay its bills. The U.S. is expected to hit the $16.4 trillion ceiling as soon as the middle of next month.
"We are not a deadbeat nation," Obama declared, less than a week away from taking the oath of office for a second term.
"Raising the debt ceiling does not authorize more spending," he said. "It just allows the country to pay the bills it's already committed to."