E-mail updates
Follow on Twitter
Subscribe to RSS
The Treasury Department is confident the new Congress will act by the end of the first quarter of this year to raise the government's debt ceiling, a move that would avert a default by the United States on its obligations and a subsequent financial crisis.
Despite the apocalyptic language used by White House economic adviser Austan Goolsbee over the weekend about the dire consequences of a failure to raise the nation's debt limit from its current level of $14.29 trillion, Treasury officials today called the debate over the debt limit a "routine matter" and played down the feisty rhetoric coming from some lawmakers opposed to an increase.
"It needs to get done; it will get done," one official said. "Whatever you think about taxes and spending going forward, responsible individuals will, I think, have to reach the judgment that defaulting on the US' obligations is an unthinkable thing."
At the moment, the outstanding U.S. debt subject to the limit stands at $13.95 trillion, leaving approximately $335 billion of "headroom" beneath the current limit. Officials gave reporters a copy of a four-page letter Treasury Secretary Tim Geithner sent to Senate Majority Leader Harry Reid saying that failing to raise the debt limit would lead to an unprecedented default by the U.S., while at the same time expressing confidence that it would get done.
"Because Congress has always acted to increase the debt limit when necessary, and because failure to do so would be harmful to the interests of every American, I am confident that Congress will act in a timely manner to increase the limit this year," Geithner states in the letter.
The letter does not "predict with precision" the date by which the debt limit will be reached, citing uncertainty associated with tax receipts and refunds during the spring tax filing season and other variable factors, but says the limit could be reached as early as March 31, 2011 and most likely sometime between that date and May 16, 2011.
There are several "exceptional actions" that Treasury could take to delay the date by which the ceiling is reached -- like suspending sales of State and Local Government Series (SLGS) Treasury securities and suspending reinvestment of the Exchange Stabilization Fund (ESF), among other things. The Department has taken some of these steps in the past but wants to avoid having to repeat them.
The officials who briefed reporters noted that the debate on the debt limit had so far had no impact on bond yields and were not expected to do so -- a sign that investors also believe Congress will act in time. They declined to discuss what kinds of concessions might need to be made pass an increase in the debt ceiling, arguing that budget cuts should be part of a separate discussion.
Geithner had been talking with members of Congress about the issue and would continue to do so, but officials could not provide a list of those contacts.
While the letter was addressed to Reid, the heads of relevant committees in both Houses and "all the Members of the 112th Congress" were cc-ed.
Worst case scenario
Default would have worse and further-reaching effects on the country than the temporary government shutdowns of 1995 and 1996 and could be more harmful than the 2008-2009 financial crisis, causing potentially millions of job losses and hurting the U.S. dollar and the status of U.S. Treasury bonds as safe haven investments, according to the letter. It would also jeopardize a range of payments from Social Security, Medicare and veterans' benefits, to Medicaid and unemployment payments to states, to student loan payments and military and federal civil service salaries.
"It will have enormously negative consequences to the country, to American individuals, families, businesses, the whole gamut and none of that ought to be jeopardized by, you know, whatever the result of an important and, you know, obviously complicated set of discussions about taxes and spending," said one official.
A U.S. default would mean the country could not borrow additional funds or pay the interest on funds it has already borrowed. Officials did not say how quickly a default would occur if the debt ceiling is reached.
The letter states that a default would also impose a "substantial tax" on Americans by raising all borrowing costs for state and local government, companies and consumers, including an increase in mortgage rates.
"Equity prices and home values would decline, reducing retirement savings and hurting the economic security of all Americans, leading to reductions in spending and investment, which would cause job losses and business failures on a significant scale," it reads.
Leave a Comment:
They shpould be Confident.
America is Confident that Speaker Boehner will Cry himself to sleep Every Night from haveing to raise the Debt Ceiling!
All brainwashed steeple of Fox will start with their oppositions soon. After the reading of the Constitution this morning you'd think Republican crackpots would get it.
paging Dr No
Your expertise is not valued.
And I'm confident that the GOPTP will make themselves look like the fools they are in a big, contrived drama before doing the only thing they responsibly can.
Of course they will. If they don't then Bonehead will have to tell all his old white fart fans that he is going to cut their SS and Medicare.
All you old farts out there....... when Bonehead & Co. talk about cutting entitlements that means Social Security, Medicare, and Medicaid. Politicians will keep everything that they believe THEY are entitled to, but will cut everything that they think you are NOT entitled to.
If only tea-baggers would get it through their thick skulls that republican politicians are NOT their friends. Republican politician BFFs are big corporations like oil. Don't you remember Rand paul suggesting that it was unpatriotic to suggest that BP is to blame for the oil spill. I'm sure he won't think it unpatriotic to destroy the middle-class as long as him and his buddies get richer.
Ramboet
Don't you remember Rand paul suggesting that it was unpatriotic to suggest that BP is to blame for the oil spill
I remember Joe Barton apologized to BP because he thought it was a“shakedown” for a $20 billion escrow fund for Gulf Coast damages.
Turns out ole Joe's top corporate donor is a partner of BP .
With politicians ole like Joe the middle class needs help. So does ole Joe for his head. I still can't get over this nutjob. I mean to take donations is one thing; but to publicly humiliate the people in the gulf is horrendous.
"feisty rhetoric"?
We're doomed......
so doomed.
Liberals - Please peruse and explain the following. Slight contradiction, no?
Goolsbee said a failure to raise the debt ceiling would cause “a worse financial economic crisis than anything we saw in 2008…This is not a game. The debt ceiling is not something to toy with.”
Four years ago, however, then-Sen. Barack Obama, D-Ill., voted the exact way President Obama is now cautioning senators not to do.
“The fact that we are here today to debate raising America's debt limit is a sign of leadership failure,” he said on March 16, 2006. “Leadership means that ‘the buck stops here.’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership . Americans deserve better. I therefore intend to oppose the effort to increase America's debt limit.”
Source: http://blogs.abcnews.com/politicalpunch/2011/01/gibbs-senator-obama-only-voted-against-raising-debt-ceiling-in-2006-because-he-knew-it-would-pass-an.html
According to you, everything Obama does or says in wrong. Which position do you believe about rasing the debt ceiling is correct?
Well, T least they are beginning to recognize a losing strategy when they start one.
The electorate wants the spending curtailed. Boehner has insisted that there be cuts in spending BEFORE the debt ceiling be raised. By insisting that raising the debt ceiling is "critical", the White House has just run out of maneuver room. If they do not agree to the cuts, no dice on raising the debt ceiling.
One wonders what nitwit came up with that strategy in the first place.
Dear JS1:
POLITICS
Wow, Rick, you mean to say that the great Obama plays politics with something as critical as the debt ceiling?!?
Wow. Just wow.
drive_by_observer:
According to you, everything Obama does or says in wrong. Which position do you believe about rasing the debt ceiling is correct?
======================
1) I agree with what Obama said in 2006.
2) Do you have any explanation for Obama's 180 degree shift in his thoughts over the debt ceiling? Quite dramatic, no?
3) I thought you were ignoring me. Yet another dramatic 180 degree shift.
This almost sounds like the "Treasury officials" (aka, Obama's minions) are "Doing business as usual in Washington DC". Hasn't anyone briefed them on the main point of why the November elections went so badly for the Democrats?
A real Adult Moment is coming up for Obama and his administration. He can talk about deficit reduction, but now he's going to have to back up his rhetoric with action.
That was someone else ignoring you. I have way too much fun making fun of you.
Did you post on here how much you approved of Obama's positon in '06? I'm guessing not, because he wasn't too important then.
Anyway, a guy is NOT to ever change his positon, then? If a pro-abortion advocate changed to an anti-abortion advocate, he'd be bad, then? Not changing the subject to aboriton, just trying to illustrate a point.
Buzz, you really need to get over your anger.
Did you read the quote from Obama Buzz? Don't you think it's at least slightly odd he's done such a 180 degree pivot on the issue? You ask "Anyway, a guy is NOT to ever change his positon, then?" Certainly one can always change his/her position, but if one changes their position, especially in as a dramatic shift this one appears to be, then there must be an explanation for that shift.
Seeing Obama isn't even asked the question, and so he won't be answering it, can you or anyone else speculate as to why Obama has had this sudden change of heart?
Still waiting for someone, anyone, to explain this dramtic shift of Obama's position on the issue.
Drive by Observer,
I think some people are questioning why it was okay for Obama to vote against raising the debt ceiling while he was a senator, (I believe he called voting to raise the debt ceiling irresponsible) but NOW if you don't vote to raise the debt ceiling you are obstructing. This is a major flip-flop by Obama.
I believe that voting NOT to raise the debt ceiling could have dire consequences for our country's economy, but in politics today, you can't expect people not to point out Obama's flip-flop.
Yes he Does Play Politics, NJ: Chicago Style, doncha Love it!
He does'nt Flout nuttin!
The sound of crickets persists.
There is no debt ceiling. What are you people talking about ? The demos have many special interest groups each of whom require money, your money. Pay up willingly or else.
One hopes that at some point, reality will sink in to the newly elected GOPTP. It is essential that the debt ceiling be raised when necessary. It would not have been necessary IF Bush and pals had not been so fiscally irresponsible. Raising it does not mean both parties cannot continue working together to reduce the debt. Failing to raise it would put the USA in default and risk a global calamity the likes of which we have not seen; and one I do not care to witness.
The reality is this: we cannot cut enough spending to solve the debt problem. Even if we cut the defense budget to almost zero, cut discretionary spending on everything to almost zero, it would not solve this problem. For one thing, cutting all that spending immediately means more loss of jobs in both the public and private sector which would result in further revenue reduction--it is a downward spiral and one that would slow the recovery and probably result in a second recession. The only really honest way out of this mess is to do what Clinton and the GOP did in the 1990's, raise taxes and require that every additional penny raised be used to pay down the debt. That can be done in two years when recovery from the great recession is stronger. In the meantime, work together to fix what is broken, develop a long-term plan to implement over time--stop kicking the can down the road is the best way to put it.
I'm a liberal on many issues but a fiscally responsible one. I complained about the debt, long before the internet, all through the Reagan, Bush 41 years, I talked about to anyone who would listen. Then Clinton and the GOP compromised to solve the problem and the USA was on its way to reducing it. I was and remain very angry at Bush 43 and his fellow GOPers who went on a tax cutting and spending spree that brought the country to its knees. It will be a long time before we completely climb out of the hole Bush and the GOP dug; I hope the newly elected GOPTPers do not dig the hole any deeper but so far, none of their actions show much promise.
Tell big ben over at the fed to put the printing presses in hyper drive and just print some more money, or maybe tell him to get back the 3 trillion he gave to overseas banks at the taxpayers expense, and it all came tumbling down.
JoAnna :
I agree. The words of then Senator BO say it all... "failure of leadership". Let's see if he comes out and blames Bush.
JoAnnaSmith1
Liberals - Please peruse and explain the following. Slight contradiction, no?
Four years ago, however, then-Sen. Barack Obama, D-Ill., voted the exact way President Obama is now cautioning senators not to do.
Our economy was not in doubt” four years ago.
I have a question too. Did you get you degree online or that same place the nut job tax attorney Michelle Bachmann got hers?
It would make sense if you got yours from Oral Roberts University they serve tea for two there. You and she seem so compatible.
OK Everyone... let's put our money where our mouth is.
The debt ceiling is not raised........ Where do the cuts begin?
And they need to happen now because the money will be needed right away. And if government is shut down.. you all know the consequences... right?
Let's go. I'm ready.
I got it, cut 25% across the board call it a tax increase and everyone will be happy.