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."