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Breaking from Moneynews.com White House Economist: Failure to Lift Debt Ceiling Will Be ‘Catastrophic’ Austan Goolsbee, chairman of the U.S. Council of Economic Advisers, said if Congress fails to raise the debt ceiling, the “impact on the economy would be catastrophic.” “I don’t see why anybody’s playing chicken with the debt ceiling,” Goolsbee said on ABC’s “This Week” program. “If we get to the point where we damage the full faith and credit of the United States, that would be the first default in history caused purely by insanity.” The government is slated to hit the legal limit on borrowing, currently set at $14.3 trillion, sometime in the spring, and some lawmakers have they said will demand tough budget cuts in exchange for their votes to raise the cap. Congress must agree to raise that ceiling or it could be forced to default on its obligations. The U.S. has a $1.3 trillion federal budget deficit. President Barack Obama’s debt-reduction panel failed last month to agree on its chairmen’s recommendations for ways to reduce the annual deficit to about $400 billion in 2015. The plan would have increased taxes by $1 trillion by 2020 by scaling back or eliminating hundreds of deductions, exclusions or credits such as those allowing homeowners to write off interest on their mortgage payments. It would also have cut individual and corporate income tax rates. Senator Lindsey Graham, a South Carolina Republican, said failing to raise the debt ceiling “would be very bad for the position of the United States in the world at large.” Still, he wouldn’t vote to raise it “until a plan is in place” to deal with debt, Graham said on NBC’s “Meet The Press.” Reaching an agreement with Republicans, Obama on Dec. 17 signed an $858 billion bill that extends for two years the Bush-era tax cuts for all income levels. It also continues expanded jobless insurance benefits to the long-term unemployed for 13 months and reduces payroll taxes for workers by two percentage points during 2011. © Copyright 2010 Bloomberg News. All rights reserved.