US Default Should Be ‘Unthinkable’: Larry Summers
It should be inconceivable for the United States to default on its debt , Larry Summers told CNBC on Tuesday, stressing that the country's creditworthiness must not be held hostage by budgetary wrangling.
"It should be unthinkable to default on debt in the United States… after 200 years the thought that the full faith in credit of the U.S could be called into question is unthinkable," Laurence Summers, former treasury secretary, said.
Summers said the 2008 financial crisis offered a lesson in what happens when base safe assets are put at risk, and said the country should "never experiment" as it did back then.
"Everybody should be for meeting the debt obligations of the U.S. and then there needs to be a very vigorous an active discussion around what is a very real problem; the sustainability over the long term of the U.S.financial position which surely needs to be addressed in a balanced way with both measures on the expenditure side and measures on the revenue side,"Summers said.
At the end of February, the U.S. government will reach its debt limit and an agreement is needed between Republicans and Democrats for an increase to the debt ceiling. It is expected that both sides will face similar acrimonious discussions to those that preceded an eleventh hour deal to avert the "fiscal cliff" in the New Year.
He added that it was "inappropriate and not credible" to hold the country's creditworthiness hostage to discussions about the debt ceiling.
"I'm confident that the president regards an absolutely critical priority for him as bequeathing to his successor four years from now a nation that is in a sustainable financial position. And that's obviously going to require addressing both spending and addressing revenues…and that he is going to do that," he said.
By CNBC's Shai Ahmed; Follow her on Twitter @shaicncb