Bernanke: Debt limit should be scrapped

Federal Reserve Chairman Ben Bernanke on Monday said the debt ceiling has no value to the United States and should be scrapped. 

"It would be a good thing if we didn't have it," the Fed chairman said at the University of Michigan. 

Bernanke acknowledged, however, that that charged politics surrounding the debt likely mean the borrowing limit is here to stay.

The powerful Fed chairman has repeatedly urged Congress to avoid putting the U.S. economy and its financial reputation at risk with long-running fights over the debt limit, which stands at $16.4 trillion. 

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The last showdown over the debt limit in 2011 resulted in the first-ever downgrade of the nation’s credit rating and wreaked havoc on financial markets.

The Fed chief said the argument in Congress about the debt ceiling misses the point, because the increase in borrowing authority simply accommodates the spending lawmakers have already approved.

"This is sort of like a family saying, 'Well, we're spending too much, let's stop paying our credit card bill,' " he argued.

President Obama delivered the same message during a press conference on Monday morning. He said the onus is on lawmakers to show that the U.S. isn’t a “deadbeat nation” that doesn’t pay its bills.

“Raising the debt ceiling does not authorize more spending, it simply allows the country to pay for spending that Congress has already committed to,” Obama said.

Treasury Secretary Timothy Geithner on Monday said the U.S. could default on its obligations as early as mid-February. He warned congressional leaders that default on any payments would be economically damaging and said it would ultimately add to the budget deficit.

“Default would increase our borrowing costs and damage economic growth and therefore add to future budget deficits, not decrease them. This is why no President or Secretary of the Treasury of either party has ever countenanced even the suggestion of default on any legal obligation of the United States,” he added.

But Republicans say the need to increase the debt limit is an opportunity for the nation to get its fiscal house in order.

Bernanke rued the brinksmanship during his appearance in Michigan. When asked by an audience member whether the debt ceiling had any value, he was dismissive.

"No, it doesn't really have — it's got symbolic value, I guess," he said.

At the same time, Bernanke did not entertain any of the new ideas floating around that would allow the executive branch to avoid the debt limit altogether.

One audience member asked the Fed chairman about the idea of Treasury minting a $1 trillion coin and depositing it with the Federal Reserve to fund government operations.

Treasury ruled out that idea on Saturday with backing from the Federal Reserve.

"I'm not going to give that any oxygen," Bernanke said, rolling his eyes.

"There are legal issues, there are policy issues," he added. "I don't think going in that direction would be very helpful."