Kiss it all goodbye -
Anton Berlin
The U.S. could reach its debt limit of nearly $14.3 trillion as early
as March 31, Treasury Secretary Timothy Geithner said Thursday.
Geithner in a letter to lawmakers said failure to raise the debt limit
could "precipitate a default by the United States" and have
catastrophic economic consequences--potentially more harmful than the
financial crisis in 2008 and 2009.
The letter received a cool reception on Capitol Hill.
"The American people will not stand for such an increase unless it is
accompanied by meaningful action by the President and Congress to cut
spending and end the job-killing spending binge in Washington,"
Republican Speaker of the House John Boehner said.
Boehner, leading a new Republican majority in the House, said spending
cuts remained a top priority lawmakers.
The Treasury Department estimates that the U.S. could reach its debt
limit as soon as March 31 and probably no later than May 16. The exact
date depends on the rate of economic growth, tax receipts and other
factors.
"This means it is necessary for Congress to act by the end of the
first quarter of 2011," Geithner said in the letter.
Geithner is pushing lawmakers to lift that ceiling for the sixth time
in less than four years. Lawmakers last increased the debt ceiling
almost a year ago.
But by Monday, the federal debt subject to that ceiling stood at
around $13.95 trillion, giving the government just $355 billion before
it would be legally prohibited from borrowing to pay its financial
obligations.
A Treasury official said the administration is hoping to separate the
debt ceiling increase from the debate on spending. And in his letter,
Geithner said deep spending cuts would delay reaching the ceiling by
no more than two weeks.
Boehner, though, emphasized the importance of spending cuts.
"While America cannot default on its debt, we also cannot continue to
borrow recklessly, dig ourselves deeper into this hole, and mortgage
the future of our children and grandchildren," he said.
Failure to raise the U.S. debt ceiling could cast doubt on the U.S.
government's ability to meet its obligations and send shockwaves
through the bond market.
"Default would have prolonged and far-reaching negative consequences
on the safe-haven status of Treasurys and the dollar's dominant role
in the international financial system," Geithner said.
A Treasury official described the request for the increase as routine.
Still, the political balance on Capitol Hill has changed, potentially
making the process more fraught.
Many conservative candidates ran election campaigns criticizing their
opponents for voting to lift the debt ceiling last year, and promised
to vote against another increase when federal borrowing hits the
current cap. Their promises likely will be tested in the coming weeks.
The U.S. House of Representatives agreed Wednesday to change voting
procedures on increasing the nation's borrowing limit. The new policy
means that lawmakers will be forced to go on record in support of
raising government borrowing or vote "no" and risk putting the U.S.
into default.
Previously, Congress had approved debt limits automatically as part of
the budget resolution.
A. Dumas
> $14.3 trillion