Geithner Says Failure to Raise Debt Ceiling Unthinkably Damaging
By Cheyenne Hopkins - Jun 30, 2011 6:28 PM CT
U.S. Treasury Secretary Timothy Geithner said today that Congress has “no option” other than approving an increase in the $14.3 trillion debt ceiling.
“It will be unthinkably damaging to the economy, much more damaging than even what we faced in that dark period of ’08 and ’09,” Geithner said in Chicago at the Clinton Global Initiative conference.
He said Congress has no choice and will raise the debt limit. The Treasury, which has projected that its borrowing authority will expire Aug. 2, plans to release an update on the debt limit tomorrow.
Senate Majority Leader Harry Reid, a Nevada Democrat, announced today that the Senate will cancel its July 4 recess to remain in session next week for debt-limit talks. Reid’s decision came after President Barack Obama said Congress shouldn’t be taking vacations while the issue is unresolved.
“We really have no option to go into a period where we don’t start paying our bills. Congress has no choice but to pass this and I’m sure they will,” Geithner said.
Geithner has signaled to White House officials that he’s considering leaving the administration once a debt limit agreement is reached, according to three people familiar with the matter. At the Clinton Global Initiative conference, Geithner said he will be at Treasury “for the foreseeable future.”
‘Yellow Light’
At a news conference yesterday, Obama criticized Republicans for the failure to reach an agreement on the debt limit.
“The yellow light is flashing,” Obama said, warning of dire consequences if Congress doesn’t raise the borrowing limit before Treasury’s Aug. 2 deadline.
The two sides are at a standoff over demands from the White House for tax increases and from Republicans for cuts in the Medicare health-insurance program for the elderly and other entitlements. Bipartisan talks on debt reduction, led by Vice President Joe Biden, collapsed last week.
Standard & Poor’s in April put the U.S. government on notice that it risks losing its top credit rating unless policy makers agree on a plan by 2013 to reduce budget deficits and the national debt. Moody’s Investors Service this month said it will put the U.S. government’s Aaa credit rating under review for a downgrade unless there’s progress on increasing the limit by mid-July.
To contact the reporter on this story: Cheyenne Hopkins in Washington at chopkins19@bloomberg.net To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net
Tim Pawlenty, Reince Preibus Dubbed 'Clueless' On The Debt Default
Michael McAuliff Posted: 06/28/11 01:35 PM ET
WASHINGTON -- Republicans are clueless about the economic devastation they are courting with brinksmanship over raising the nation's debt limit, Democrats charged Tuesday.
Senate Majority Leader Harry Reid (D-Nev.) leveled the charge in his floor speech Tuesday morning, and his office followed with a press release pointing to a list of influential business leaders and economists who warn that the U.S. government's failure to pay its bills would spark a new financial catastrophe.
"Failure to avert this crisis would have dire consequences," Reid said. "It would result in the most serious financial crisis this country has ever faced. Millions of Americans could lose their jobs. Social Security checks could stop. So could paychecks to our troops."
Reid argued that the GOP was willing to risk those financial hardships in order to protect subsidies for the oil industry and tax breaks for corporate jets.
Soon after he fired that broadside, Reid's policy shop pointed to a Tuesday morning discussion between MSNBC's Joe Scarborough and two top Republicans -- presidential contender Tim Pawlenty, the former governor of Minnesota, and Republican Party Chairman Reince Preibus. Pawlenty and Preibus had said they did not know what to expect from a default:
Scarborough: What's the impact if it's not raised?
Pawlenty: Well, we don't know that.
Scarborough: Well, I don't know what's going to happen to me if I jump off a cliff. But I think I'll go splat.
Preibus had a similar view:
Scarborough: What do you believe, though? Do you believe that if we don't raise the debt ceiling the economy will just keep chugging along normally or do you believe it will cause a financial crisis?
Preibus: You know, I don't know, because we've never been there before, Joe.
Reid's team noted that numerous economists, business leaders and Republican leaders have warned of disaster if the nation's spending cap -- now set at $14.3 trillion -- is not raised by early August.
Under a release titled "REPUBLICAN LEADERS CLUELESS ON THE CONSEQUENCES OF DEFAULT" Democratic Policy and Communications Center spokesman Brian Fallon named several of those who have been warning of the consequences of default.
"While [Pawlenty and Preibus] may be at a loss to explain the consequences of a failure to raise the debt limit, many business leaders and fellow Republicans know the dire consequences of a failure to raise the debt limit," the release said.
Despite the Democrats' criticism of Republicans, Don Stewart, a spokesman for Senate Minority Leader Mitch McConnell (R-Ky.) was unimpressed with Reid's own plan to reduce the deficit, citing a list of tax cuts Reid had mentioned and arguing that Democrats want to hike taxes a lot more.
"The point is, Sens. Reid and [New York's Chuck] Schumer complained this morning that Sen. McConnell doesn't support the Democrat plan to raise hundreds of billions in new tax hikes on job creators in the middle of an employment crisis," Stewart said. "They're correct: Sen. McConnell does not support hundreds of billions in new tax hikes on job creators. He agrees with what the President said last year -- tax hikes in a down economy will make matters worse and slow job growth."
Stewart was referring to Obama's decision to extend the Bush-era tax cuts for the wealthy for two years.
He also argued the money saved by ending the breaks for oil companies would not be nearly enough to eliminate the deficit, and suggested Democrats should offer their full list of tax hikes or revenue raisers.
Fallon said the Obama administration has offered McConnell and Republican leaders hundreds of billions of dollars worth of choices to raise revenue, and all were turned down.
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