WASHINGTON -- The White House said on Wednesday that there is no “Plan B” if Congress does not vote to increase the debt limit by August.
The debt limit, which is currently set at $14.29 trillion, was reached on Monday, but Treasury Secretary Timothy Geithner told Congress the government can continue to pay its debts until about Aug. 2 by using "extraordinary measures."
If Congress does not raise the debt ceiling by then, there is no plan in place for dealing with the resulting defaults, a senior administration official said in a briefing with reporters.
“There is no alternative to raising the debt limit. It has to be raised,” the official, who spoke to the reporters on background, said. “There’s really no way around it.”
The White House is pushing back against a few Republicans -- including Sen. Pat Toomey (R-Penn.) and Rep. Paul Ryan (R-Wisc.) -- who hinted this week the government could default on its debts for a short time in pursuit of a broader deal to cut the deficit.
Republicans have overall agreed that the debt ceiling needs to be raised but have said they will not vote to raise the ceiling unless it is paired with major spending cuts and long-term debt reduction.
But some fear that talks to reach that deal, which are being facilitated by Vice President Joe Biden, will last beyond the Aug. 2 deadline for increasing the debt limit.
A few Republicans have said extending talks beyond that deadline could be done without serious harm to the markets as long as a deal was eventually reached to raise the debt ceiling. Toomey, speaking on Wednesday at the conservative American Enterprise Institute, pointed to a weekend interview in the Wall Street Journal with investor Stanley Druckenmiller, who said he would accept late payments on U.S. debts if it meant overall progress on the long-term deficit. Sen. Jon Kyl (R-Ariz.), who is representing Senate Republicans in the White House debt limit talks, also referenced the editorial when speaking with reporters on Tuesday.
Ryan made a similar remark Tuesday, telling CNBC the investors he speaks to would be willing to accept late payments “for a day or two or three or four.”
The White House firmly rejected such an idea in the Wednesday briefing, saying even short-term default would harm the government’s credit and its reputation in the markets.
“That’s not a plan; that’s default,” the official said.
As lawmakers continue to push for a deal on the debt, the Treasury will continue to function by taking steps to “buy head room” within the current deficit, said a senior administration official.
Earlier this month, the Treasury stopped providing State and Local Government Series Treasury securities, which help state and local governments to manage their debt.
After reaching the debt limit Monday, the Treasury began using additional measures to avoid default. Geithner declared a “debt issuance suspension period” on Monday to borrow from the Civil Service Retirement and Disability Fund. The fund will be made whole after the debt limit increase is enacted, according to law.
The Treasury will continue some business as usual, including maintaining its auction schedule to issue new bonds.
The administration rejected the idea of selling off assets to buy time for the debt ceiling deal, arguing it would amount to a “fire sale” where assets would likely be sold for less than their true value.
“The idea of dumping gold on the market would be extremely damaging,” a senior official said, while another official added that most assets do not have enough value to buy the government much time.
Despite rhetoric over raising the debt ceiling by some lawmakers, Geithner is confident the debt limit will eventually be increased, an official said.
“They always seem extremely challenging, but they seem to get there,” an official said.