It's a matter of honor.
That's one reason why the federal government must raise the debt ceiling in time to avoid a default, said Frank Keating, CEO of the American Bankers Association, a Washington, D.C., trade group, in his testimony before the U.S. Senate Committee on Banking, Housing and Urban Affairs. He spoke at the Oct. 10 hearing "Impact of a Default on Financial Stability and Economic Growth."
"In this country, our word is our bond," Keating said. "The respect and admiration that the United States and its institutions inspire around the world are based on the certainty that when our nation makes a promise, we keep it.
"If Congress fails to act and we hit the debt ceiling, we will set off a chain of events that will cover our entire economy and impact all Americans. These impacts would not be easily reversible. The repercussions could linger for years, providing a constant drag on our economy."
"Default would also put the United States in the category of reckless debtor nations that have broken their word in the markets, including Argentina, Venezuela and Cameroon. Defaults left those countries financial pariahs and debilitated their economies," Keating said.
"If our nation defaults on its nearly $17 trillion in debt, the harm is likely to be measured in hundreds of billions of dollars," Keating said. "It would raise the cost for taxpayers to service our country's debt and the cost of borrowing for businesses, meaning job losses and price increases."
Rather than failing to pay existing obligations, the government should focus on ways to further reduce spending and make the debt level more sustainable, Keating said.
"The answer to managing our debt is not to simply stop making our payments on money already spent," Keating said. "We must pay our bills on time and in full. Then, we must carefully manage our future spending so that we can begin to pay down our accumulated debt."
Follow me on Twitter: @marciegeff.