Geithner warns Congress raise debt limit to avoid national catastrophe

January 6, 2011 by · Leave a Comment
Filed under: Economic News 

With all the economic rhetoric  about fiscal and monetary policy, some things never change.   One of them is the pretty straight talk from politicians on the U.S. debt limit when we get ever closer to the new limit.   We stop the talk about cutting deficits and living within our means and bring out “the sky is falling” talk because of the reality of what will happened if we stop issuing debt and refinancing our Treasuries.  You can’t hide this fact and I do like the lack of beating around the bush when it come to this subject.

Yes, we will have grandstanding by both parties on the ideology grounds but when push comes to shove, they all know the score.  The debt will be raised or we will literally have a mini-civil war in this country.  We are too used to this bubble-based living.  Just saying….

Washington Post – Treasury Secretary Timothy Geithner warned lawmakers Thursday that the national debt could hit the legal limit on federal borrowing as soon as March 31, and he urged them to act quickly to avoid a government default that would spark “catastrophic economic consequences that would last for decades.”

In a letter sent to every member of Congress, Geithner said the national debt now stands at $13.95 trillion – $335 billion short of the current limit on borrowing that Congress set last year. Unless Congress acts to raise the limit, the letter says, the United States will default on its debt, a calamity that would be unprecedented and that could destroy “millions of American jobs,” spike interest rates, hurt the dollar and halt federal payments to millions of retirees, veterans and active U.S. troops.

“For these reasons,” Geithner wrote, “any default on the legal debt obligations of the United States is unthinkable and must be avoided.”

The letter sets the stage for a showdown with congressional Republicans, who are threatening to block a debt limit increase unless it is paired with deep spending cuts and budget reforms that limit future spending. Even some Democrats have said they would be reluctant to raise the limit above $14.3 trillion without a plan for reducing the budget deficits that force the nation to borrow.

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