Treasury Secretary Timothy Geithner says it’s “unthinkable” that there would be a time when the U.S. couldn’t pay its bills. That’s why he says he’s confident of a deal to raise the government’s borrowing limit before an Aug. 2 default deadline.
Negotiations between U.S. President Barack Obama and congressional leaders have reached a crisis point with disputes over spending cuts and additional tax revenue. Speaking on CNN’s “State of the Union” program, Geithner said it was critical that Congress approve a new debt ceiling that gets the country into 2013, past the November 2012 presidential election.
“It’s unthinkable that this country will not meet its obligations on time. It’s just unthinkable we’d ever do that. It’s not going to happen,” he said. “The most important thing is that we remove this threat of default from the country for the next 18 months. What the leaders know is that they need to agree on something together that will pass the House (of Representatives), pass the Senate that the president can accept.”
He also said that a two-tiered proposal by U.S. House Speaker John Boehner, the top Republican in Congress, to lift the debt ceiling through the end of 2011 and then do it again later does not have the votes to pass Congress and it was not acceptable to the White House.
“What we cannot do – because it would be irresponsible – is to leave the threat of default hanging over the American economy for a longer period of time,” Geithner said.
The United States will run out of funds to service its debt on August 2 if Congress does not approve additional borrowing. Republicans have insisted the White House agree to deep spending cuts for long-term deficit reduction before they approve any increase in America’s debt burden.
Negotiations toward that agreement have whipsawed for weeks, finally hitting a brick wall over taxes, one of the most ideologically divisive issues in U.S. politics. Geithner said Obama was communicating with all congressional leaders throughout the day on Saturday.
In his CNN interview, Geithner also said that the U.S. economy slowed “a lot” in the first half of 2011 and that growth should be better in the second half. He also said the jobless rate was unacceptably high.
An aide to Republican leaders said on Saturday lawmakers were working on a plan for $3 trillion to $4 trillion in savings over 10 years, but another high-ranking Republican official said no numbers had been set.
It was not clear if this package contained additional tax revenue alongside cuts in government spending, as Obama has demanded.
Republican leaders want “to show progress” by 4 p.m. EDT on Sunday, before financial market trading gets under way in Asia, and have legislation to unveil Monday. A Democratic aide said Republicans were pushing a package that raised the debt limit and cut spending in two steps, while Democrats want a single deal to cover borrowing through 2012.
Michael Steel, a spokesman for Boehner, the top Republican in Congress, said that “a two-step process is inevitable.” Disagreement on that issue prompted Senate Democratic leader Harry Reid to express new disappointment with the process, saying Republican “intransigence” was “pushing us to the brink of a default.”
The frantic drive toward a deal over the weekend began after closed-door talks between Obama and Boehner collapsed on Friday. Those talks broke down as Republican leaders balked at a White House plan to raise revenues by $3.5 trillion to $4 trillion over 10 years, complaining it contained $400 billion more in additional tax revenue than they could stomach.
Obama, angry at the collapse of negotiations, chided Republicans and warned time had run out to lift the debt limit. The White House kept up the pressure on Saturday, urging Congress not to play “reckless political games” and warning against stop-gap measures that fail to tackle the deficit.
Boehner must overcome stout resistance from Tea Party movement conservatives in his own party, who adamantly oppose any steps to raise tax revenue.
Rating agencies say they will cut America’s Triple-A credit rating if the United States fails to meet debt payments, likely triggering global market turmoil. Even if the United States does not default, its rating will be under pressure if Congress fails to tackle long-term deficit reduction.
Financial markets are growing more edgy and U.S. banks and businesses are making contingency plans for the possibility of a debt default that would drive up interest rates, sink the dollar and ripple through economies around the world. [via Reuters and SF Chronicle]