Obama: Congress Must Increase Debt Ceiling or Else

Brendan Smialowski | AFP | Getty Images

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."

"The consequences of us not paying our bills would be disastrous," he said.

Obama said the consequences would include the delay of Social Security benefits and veterans' checks. He said he would be willing to assume authority for raising the borrowing limit if Republicans were afraid of assuming such responsibility. (Read More: Top Democrats Urge Obama to Weigh Unilateral Debt Hike )

The president also said he will soon ask Congress to enact new gun legislation in the wake of the shootings a month ago that left 20 elementary students and six adults dead in Newtown, Conn. Facing stiff opposition from the National Rifle Association, he conceded lawmakers may not approve everything he asks for.

Obama said it is possible that the Republican-led House of Representatives could vote against raising the debt ceiling. If a government shutdown results, he said, "it will damage our economy."

He warned Republicans not to demand concessions in exchange for raising the borrowing authorization. Protracted haggling over raising the debt ceiling in 2011 brought the nation close to default and resulted in a credit rating downgrade and financial market turmoil that slowed economic recovery.

(Read More: Obama's 'Crazy Spending' Must Be Stopped: Norquist)

"They will not collect a ransom in exchange for not crashing the economy," Obama said. "The full faith and credit of the United States of America is not a bargaining chip. And they better decide quickly because time is running short."

He said the country is making progress toward reducing its deficit, but it can't be done "by spending cuts alone."

"We are poised for a good year if we make good decisions and sound investments," the president said.

In a statement moments after the news conference, McConnell said Obama must get "serious about spending and the debt limit is the perfect time for it." And Boehner said: "The American people do not support raising the debt ceiling without reducing government spending at the same time."

On gun violence, Obama said Vice President Joe Biden has developed a list of sensible, common-sense measures, and he would consider them.

Obama told reporters that stronger background checks and control of high-capacity magazine clips and a ban on assault weapons were proposals that he believed made sense.

He said he expected to review Biden's proposals and then have a "fuller presentation" on gun violence proposals later this week. Members of Congress, he said, will have to examine their own consciences when it comes to voting on gun measures.

Obama made his remarks as a new Congress was settling in for its own new term, Republicans in control of the House and Democrats in the Senate.

Lawmakers face three distinct deadlines before April 1. The debt limit must be raised to prevent a default, a series of across-the-board spending cuts is to kick in on March 1, and funding for most government programs will run out on March 27.

Obama virtually dared Republicans to let the government shut down rather than renew funding beyond March 27. "It will hurt the economy," he said emphatically.

Jabbing at Republicans, he quoted Boehner's remarks of two years ago that allowing a default on U.S. obligations -- the practical effect of failing to raise the debt limit -- would be a disaster.

Obama said he was willing to consider future deficit cuts, but only if they are done independently from a vote to raise the debt limit.