The Treasury Secretary said yesterday that if the ceiling isn't raised, and the U.S. defaults on its debt, the consequences will be as devastating as those of the 2008 financial crisis--and he added that it would be Republicans' fault.
"As we saw in the fall of 2008, when confidence turns, it can turn with brutal force and with a momentum that is very difficult and costly to arrest," Geithner told an audience at the Harvard Club Tuesday. That crisis and the subsequent economic downturn, of course, cost millions of jobs and led to a a bailout in excess of $1 trillion to avert a total financial collapse.
Referring to Republican threats to oppose raising the ceiling unless the Obama administration agrees to massive spending cuts, Geithner declared: "If Republicans try to impose that plan on this country as a condition for raising the debt limit, then they will own the responsibility for the first default in our history, with devastating consequences."
On Monday, the U.S. reached its current legal borrowing limit of $14.29 trillion. Geithner said yesterday he could move money for a while in around in order to avoid default. But in a couple of months, around August 2, he cautioned, he'll no longer be able to do that.
In the past, the ceiling has routinely been raised, without pre-conditions. But Republicans have used concern over the deficit to argue that raising the ceiling again shouldn't done without far-reaching spending cuts--though they have ruled out tax increases, including on those making more than $250,000 a year.
Geithner didn't downplay the deficit problem. "Neither Congress nor the administration should be able to use unrealistic assumptions about future economic growth or future political courage, or other forms of magical thinking, to minimize the magnitude of the reforms that will be necessary," he said.
"Rather than debating whether we should pay our past bills and whether default would in fact be so bad," Geithner added, "we should be working together to narrow our differences on how to solve the causes of future deficits."
(Photo of Geithner: Pablo Martinez Monsivais/AP)
- Tim Geithner
- The Treasury Secretary
- 2008 financial crisis--