Geithner Warns Johnson On Debt Ceiling

WASHINGTON -- Treasury Secretary Tim Geithner said Wednesday that raising the debt ceiling should not be a partisan issue, telling Sen. Ron Johnson (R-Wisc.) in a letter that Republicans have argued since the days of Ronald Reagan's presidency that failing to raise the debt ceiling would be reckless.

Geithner was responding to a letter Johnson sent President Barack Obama in May, signed by 22 other Senate Republicans, that argued the government would have enough revenue to continue functioning if the government hit the debt ceiling and suggested the White House should make contingency spending plans for that event.

Geithner said in his letter that many members of the GOP, including Speaker of the House John Boehner, acknowledge that raising the debt ceiling is the responsible thing to do, and he quoted Boehner saying, "I think raising the debt limit is the responsible thing to do for our country, the responsible thing for our economy ... if we were to fail to increase the debt limit, we would send our economy into a tail spin."

Geithner also noted that Senator Jim DeMint (R-S.C.), a favorite of the Tea Party, said in 2010: "You don't have much choice if you charge something on your credit card. You have to pay for it, and that's effectively what this debt limit is ... we've already spent the money. The question is now, do we shut down the government or do we fund what we've already done?

Even conservative icon President Ronald Reagan spoke out against playing with the debt limit, according to Geithner. Reagan wrote in 1983: "This country now possesses the strongest credit in the world. The full consequences of a default -- or even the serious prospect of default -- by the United States are impossible and awesome to contemplate. Denigration of the full faith and credit of the United States would have substantial effects on the domestic financial markets and on the value of the dollar in exchange markets. The Nation can ill afford to allow such a result. The risks, the costs, the disruptions, and the incalculable damage lead me to but one conclusion: the Senate must pass this legislation before the Congress adjourns."

In his letter, Senator Johnson encouraged the administration to set a FY 2012 "debt-ceiling budget" at $2.6 trillion, the amount of revenue the government expects to collect. Secretary Geithner said that proposal is "unworkable," as the United States currently borrows 40 cents for every dollar it spends. Johnson proposal would result in 40 percent of all government expenditures being cut, Geithner said.

Secretary Geithner warned that the cuts Johnson is proposing could send the economy back into a recession, calling them "neither feasible nor responsible."

A February 2011 report by nonpartisan Congressional Research Service -- which Geithner cited -- found that "if the debt limit is reached and Treasury is no longer able to issue federal debt ... the federal government would have to eliminate all spending on discretionary programs, cut nearly 70% of outlays for mandatory programs, increase revenue collection by nearly two-thirds, or take some combination of those actions in the second half of FY 2011 (April through September 30, 2011) in order to avoid increasing the debt limit."

Comments

[John D Rachel]

11:27 PM on 06/30/2011

Apparently each of the Republicans would shoot his own grandmother to avoid having to buy her favorite flavor of Jello for dinner tonight.

[Michael J OConnell]

06:41 PM on 06/30/2011

At some point the amount of debt the US incurs will crush us. The interest payments are only increasing and putting more money into the hands of other countries, e.g. China. We can only extract so much revenue out of our tax system and fiat currency will lead to high inflation. Screwed as usual.

[RGHardyman]

05:48 PM on 06/30/2011

It's very odd that a Party that excels in the art of money seems to think the U.S. was in the black on January 19, 2009... before "they" moved into the White House.

[jcbwell]

07:21 PM on 06/30/2011

You mean "the black guy?" In the black, the black guy, I just couldn't resist it.

[RGHardyman]

07:51 PM on 06/30/2011

See, I wanted to do that, but I started tripping over my words and then I started thinking about spades and it all went to Hell.... :)

[Jim Pasterczyk]

03:26 PM on 06/30/2011

The Repos have no problem with tearing down the temple around them. Somehow they think this will save it. To them personal responsibility seems to be something for the other guy to worry about.

[GoldsteinD]

04:22 PM on 06/30/2011

there's more than one way to tear down this temple. the other way is to spend money you don't have. Look at Europe

[jcbwell]

07:24 PM on 06/30/2011

Germany, with it's nearly 100% unionized workforce, single-payer health care, and a basic right to 32 days off each year, is the largest exporter in the world, and has one of the strongest economies (with most Germans considering the US economy as second-class, because it is). Stop these useless damn wars and we'd be a lot better off.

[Jim Pasterczyk]

08:26 PM on 06/30/2011

Me? I'll look at the downhill slide our previous president left us in with his massive debt and no way to deal with it because his side demagogued the heck out of raising revenue.

[Lee Johnston]

01:33 PM on 06/30/2011

(Secretary Geithner warned that the cuts Johnson is proposing could send the economy back into a recession, calling them "neither feasible nor responsible.") I'm sorry when was it announced that we were out of a recession? Geithner as Treasury Sec. is like having a car thief working valet parking (He's just waiting for the right car to make his getaway). Let’s make this simple it’s called a DEBT CEILING for a reason. Let’s be truthful about it for a minute. What happens is we go past the Debt ceiling? Geithner won’t be able to pay the $29 billion interest payment to investors that the Treasury owes. What investors would that be you ask? From WIKI "As of January 2011, foreigners owned $4.45 trillion of U.S. debt, or approximately 47% of the debt held by the public of $9.49 trillion and 32% of the total debt of $14.1 trillion. The largest holders were the central banks of China, Japan, and the United Kingdom." What other things may we not be able to pay? U.S. Foreign Aid to countries like Egypt, Jordan, Pakistan and Russia, Yes that's right we are going into debt to help support other countries that hate us. So as far as I can tell hitting the debt ceiling will make us take a good at where the money is going and who really deserves it.

[khandoor]

11:52 AM on 06/30/2011

I made a special red inked stamp to put "Tax Cheat" above Timmy's name on all bills baring his name.

[Blackdogsailing]

07:13 PM on 06/30/2011

I'm thinking about a stamp that reads "Sucker" to put under my name on every check I write to the Treasury.

[den1953]

11:01 AM on 06/30/2011

The Republicans and Tea party would rather wait until Rome burns then scratch their heads in amazement and then point their fingers at the President and blame him. So when their own corporate donors lose their azzes from defaulting on the nations debt the Republican Party can turn to corporate America and proclaim "Mission Accomplished"...............

[Me2U2]

08:42 AM on 06/30/2011

Treasury Secretary Tim Geithner said Wednesday" I still haven't figured out how to use Turbo Tax"

[zSpin2001]

08:07 AM on 06/30/2011

I think that the republicans are walking right into the presidents hands and I am enjoying every minute of it. They have talked themselves into a corner by drawing some pretty stupid lines in the sand and all the president has to do is say, OK do what you have to do. The republicans are starting to sweat and it is evident in how loud they are starting to scream. It's the scorched earth policy of attempting to fight over a piece of land that nobody wants. Do you think they would actually take the rest of us with them? On the flip side the democrats have turned into a group of political pansies that can't seem to find a pointy stick to draw a line.

[halfpricefaustian]

01:42 PM on 06/30/2011

I'm amazed Obama hasn't caved yet, it's been a week since the talks broke down. So far he seems to be handling it well, so maybe he has learned something. Especially in this situation where he really holds the big cards: 1) If Republicans don't agree to the debt ceiling increase, Wall Street will beat the beejeesus out of them 2) Most Americans understand that revenues need to be increased along with spending cuts. 3) With so many TP loonies in the new congress, Boehner needs Democratic support to get anything done on the limit. It's time to understand when you have the upper hand and use it. Hope springs eternal.

[porsche996]

07:12 AM on 06/30/2011

"Well punk...see I've lost track myself...was it five or six.....so ya gotta ask yourself....do ya feel lucky?"

Dirty Harry

[porsche996]

07:07 AM on 06/30/2011

With our economic system based on debt not gold or silver or diamonds but upon debt....we run a deficit in order to make funds available...so why is this a race issue?

[porsche996]

07:04 AM on 06/30/2011

I was wrong the Congress gave GW Bush a $10 Trillion credit card and the grace period is up.....debt is now coming due.....Obama has spent almost 200 Billion of the $14 trillion deficit....so why do the Republican terrorists not give the President the same respect they give white Presidents?

[Ed C Atlanta]

07:51 AM on 06/30/2011

Agreed, but in the oppositions minds it is not about race and then when you say it is they want to flip the script and call you racist,,now that's funny seeing that bush was able to get the ceiling raised seven times in eight years, without noo problems,,

[porsche996]

06:54 AM on 06/30/2011

Debt ceiling raised 74 times before for white Presidents...10 times since 2001.

[porsche996]

06:52 AM on 06/30/2011

It looks like the Republicans gave GW Bush a credit card with a $6 trillion limit for 2 wars and a tax cut for their BFF's. Now the grace period is up and the charges are now due.

This is a R*cist agenda on the part of the GOP...the debt ceiling has been raised 74 before without a qualm or quibble 10 times since 2001.

[AbstractImp]

06:29 AM on 06/30/2011

Well, I guess Wall St IS nervous -