January 12th, 2011
The Wall Street Journal
By: Meena Thiruvengadam and Jeffrey Sparshott
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.
June 25, 2010
US Treasury Secretary Timothy Geithner has told the BBC that the world “cannot depend as much on the US as it did in the past”.
He said that other major economies would have to grow more for the global economy to prosper.
He also played down any differences in policy between the US and Europe regarding deficit reduction.
Mr Geithner was speaking in Washington ahead of G8 and G20 meetings this weekend in Toronto.
He said all members of the group were “focused on the challenge of [building] growth and confidence”, and would be working to this end at the meetings.
The Group of Eight and Group of 20 rich and developing nations are assembling on Friday for three days of talks on emerging from the worst financial crisis since the Great Depression.
UK Prime Minister David Cameron, who has arrived in Canada along with other leaders, said in an article for the Globe And Mail newspaper: “No-one can doubt the biggest promise we have to deliver: fixing the global economy.”
“I believe we must each start by setting out plans for getting our national finances under control,” he added.
Many European governments have implemented severe austerity measures in recent weeks in order to cut debt levels.
In a letter to G20 leaders last week, US President Barack Obama warned against cutting national debts too quickly as it would put economic recovery at risk.
But Mr Geithner said the US and Europe “have much more in common than we have differences”.
“We all agree that we have to restore responsibility to our fiscal positions. Everyone agrees that those deficits have to come down over time to a level that’s sustainable,” he said.
But he said that the US and Europe would take “different paths, at a different pace” in order to reach the common goal.
“It’s going to require different things as we have different strengths and weaknesses,” he said.
Mr Geithner said the US was not in a position to work out what were the best policies for European countries to pursue.
The treasury secretary said the US had laid out “very ambitious plans as well” to cut its deficit.
But he said the US was in a stronger position than many other economies to cut its debt levels.
“We’re in the very good position of being able to deliver relatively strong growth rates [compared] to what we’re seeing in other major economies,” he said.
Some commentators in Europe argue that austerity measures should only be introduced once strong growth has been secured in the wake of the global downturn.
This was a more widely held position until the Greek debt crisis focused policymakers’ minds on cutting debt levels.
The Greek crisis showed that governments with high levels of debt find it very difficult to borrow money from international investors, money that they need to service existing debts.
October 22, 2009
By Manu Raju
The Senate must soon increase the national debt limit to above $13 trillion — and Democrats are looking for political cover.
Knowing they will face unyielding GOP attacks for voting to increase the eye-popping debt, Democrats are considering attaching a debt increase provision to a must-pass bill, possibly the Defense Department spending bill, according to Democratic and Republican sources.
Adding it to the defense bill would allow Democrats to argue that they voted for the measure to help troops in harm’s way — and downplay that their vote also expanded the limit for how much money the country can borrow.
The strategy has not yet been finalized, aides and senators said. The House already approved a debt limit increase of $925 billion — above the $12.1 trillion ceiling Congress approved as part of the economic stimulus package last February — but Democrats may seek to increase the limit further so they don’t have to revisit the politically treacherous issue until after the 2010 midterm elections.
As of Tuesday, the debt stood at $11.95 trillion, staring at senators amid a roiling health care debate in which critics have seized on the potential costs of the overhaul. Unlike those of the House, the Senate’s rules do not allow it to automatically increase the debt with its adoption of the annual budget resolution. That puts senators in a tough position politically. And if the Senate balks at the increase, Treasury Secretary Timothy Geithner has warned that the slow economic recovery could collapse, as investors around the world would sharply lose confidence in America’s abilities to meet its credit obligations.
“This president inherited, in some ways, an economic fiasco,” said conservative Democratic Sen. Mary Landrieu of Louisiana. “It’s not going to be a pleasant vote, but it may be necessary until we can get back on track.”
Indeed, Democrats are quick to point out that President George W. Bush left President Barack Obama with a $10.6 trillion debt — and that the debt limit was increased seven times in the Republican’s eight years in the White House. But now Democrats are in charge of Congress and the White House; and the Treasury Department reported last week that the annual deficit for the fiscal year that ended Sept. 30 stood at a record $1.4 trillion, with that number likely to balloon under Obama’s policies.
With the debt limit about to be eclipsed, Republicans are eager to force Democrats to find the votes to increase it among themselves, putting the majority party in a lose-lose situation and searching for a way to minimize public backlash.
“Regardless of the political treachery, I’m more worried about the economic treachery and the monetary aspects of it with devaluing the dollar,” said Sen. Ben Nelson (D-Neb.).
Senate Budget Committee Chairman Kent Conrad (D-N.D.) and the committee’s ranking member, Sen. Judd Gregg (R-N.H.), both told POLITICO that appropriators may add the language to must-pass spending legislation.
Senate Finance Chairman Max Baucus (D-Mont.), whose committee is in charge of the debt increase, said “oh yeah, it’s a possibility” of adding the debt-ceiling increase to the spending legislation.
“I care less how it’s done so long as it is done,” Baucus said.
And Conrad said he wants any debt increase to be coupled with language that would create a “comprehensive” process to force Congress to begin making tough choices to cut the debt — something akin to legislation he and Gregg proposed that would establish a commission to study ways to cut the deficit, whose recommendations would be fast-tracked through Congress.