06/02/2011 08:59 am ET | Updated Aug 02, 2011

Timothy Geithner Meeting With Republican Skeptics On Debt Ceiling

(Reuters) - U.S. Treasury Secretary Timothy Geithner meets an influential group of freshman Republican lawmakers on Thursday to try to improve chances that Congress will increase his borrowing authority and prevent a government default.

Geithner's unusual meeting with the 85 or so Republicans elected last November on a pledge to deeply cut government spending comes in the midst of slow-going White House-led negotiations with Congress over a deficit-reduction deal.

It's also exactly two months before the August 2 date Geithner has cited for when the Treasury Department will run out of ways to manage government debt without increasing the $14.3 trillion statutory limit.

Geithner is likely to hear some blunt talk from the Republicans in the House of Representatives, many of them conservative Tea Party activists, who have the power to exert just enough pressure on their own leaders to hold up a debt limit vote if immediate deep spending cuts are not first achieved.

"After the meeting I believe Secretary Geithner will see how serious we are as a freshman class about getting our debt and deficit under control so we can get our economy going again," said Representative Kristi Noem.

Noem, one of the tough "mama grizzlies" touted by ex-Alaska Governor Sarah Palin, told Reuters she hopes Geithner comes armed with some "significant spending cuts and reforms."

The first-term congresswoman from South Dakota might be disappointed as those kinds of details are still to be worked out by Vice President Joe Biden and the bipartisan group of six lawmakers who are in the early stages of spending-cut talks.

Geithner is at ground zero in Washington's fight over how to clean up the U.S. fiscal mess characterized by the $14.3 trillion debt and a $1.4 trillion deficit just this year.


Republicans, and some Democrats, are demanding an outline for trillions of dollars in spending cuts before allowing any increase in the Treasury Department's borrowing authority.

The handful of freshmen House Democrats also are invited to Thursday's meeting with Geithner.

If Geithner cannot arrive at that meeting with details on the full list of potential spending cuts, he still could make headway with this feisty group of House Republican newcomers.

"Having the Treasury secretary personally (attend), take their questions seriously and explain the consequences (of not raising the debt limit) ... could change some minds," said Andy Laperriere, a policy analyst for International Strategy and Investment who follows Washington for investors.

"It's showing a measure of respect for this group that will pay dividends," he said.

It also will be an opportunity for the freshmen to explain to Geithner "vividly why it is so difficult to vote for this (debt limit increase) back home," Laperriere added.

Without a debt limit increase, either on August 2 or some day thereafter, Geithner likely would have to make decisions on which bills to pay. He could decide to delay Social Security benefit payments to retirees, withhold military pay, sell some government assets or not pay off government bond-holders.

Some 97 House Republicans, including many freshmen, support a bill that would require Treasury to ensure that its debt obligations are met before paying other accounts.

Freshman Representative David Schweikert, questioned whether a delay in raising the debt limit would hike government borrowing costs, as the administration has warned.

"It would be nice to have an honest discussion of what the debt ceiling means ... and what we can do on prioritizing (Treasury) payments," Schweikert said.

Another House freshman, Republican Mike Pompeo, said Geithner "set August 2 as the date that bad things happen. I want to hear from him what that means from an operational matter as the secretary of the Treasury.

Pompeo said if the administration agrees to serious spending cuts -- immediately and in the medium-term -- and even closes some tax loopholes, then "most certainly" he would vote for raising the debt limit.

(Additional reporting by Andy Sullivan and Rachelle Younglai; Editing by Bill Trott)

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