Geithner: Deal must remove default threat through 2012 election

Treasury Secretary Tim Geithner showed little enthusiasm for a two-tiered debt-limit vote being discussed in Congress Sunday, saying it “makes no sense” to leave the threat of default hanging until the next election.

Speaking on Fox News Sunday, Geithner reinforced President Obama's position that any proposal from Congress needs to “take default off the table for the next 18 months … through the election.”

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Markets will look at “whether we lift the cloud of default … and the quality of reforms and savings we put into place,” Geithner warned. Any deal which forced Congress to again confront the possibility of a default in six months would be “irresponsible.”

Speaker John Boehner (R-Ohio) said late Saturday that Congress will have to resort to a two-vote approach to raise the debt-ceiling and prevent a government default. Boehner’s approach would allow Congress to hike the debt ceiling now and return to the debt-reduction components at a later date.

House Minority Leader Nancy Pelosi (D-Calif.) suggested Saturday night that the two-vote approach was on the table.

"One option is to do something in two tiers," she said as she left the Capitol, "and I don’t think we can accomplish what we need to do in deficit reduction without revenues."

But Geithner stressed that such a plan would prolong market fears by not eliminating the threat of default. He called on lawmakers to “put in place a framework of tough reforms that forces Congress to act relatively soon.”

Geithner said there were only two paths to choose from:  A “comprehensive entitlement savings and tax reform that would generate revenues to help us solve the problem,” and the McConnell plan which takes default “off the table.”

He expressed frustration with the lack of deal this close to the debt-ceiling deadline. The Treasury Department forecasts that the US will be unable to pay its bills if Congress fails to raise the debt-limit on Aug. 2.

“I never thought they would take it this close to the edge and let politics get in the way,” he said.

When asked by Fox News Sunday host Chris Wallace about any preparations the Treasury Dept. has made in advance of a possible default, Geithner would not reveal if any plans had been made to prioritize certain payments.

He said that his only plan for dealing with the default was to have lawmakers pass a debt-ceiling increase to avoid the situation.

“We do not have the ability to protect the American people,” he said.  “We are doing the responsible thing, but only Congress has the ability to make sure people get their checks on time.”

Geither would not predict how markets would react Monday morning but warned that lawmakers needed to reach a compromise soon. You “can’t ever tell what markets will do,” he said.

“We are very close to the deadline and the longer politicians take it the longer people wonder.”

Speaker Boehner spoke to rank-and-file Republican members on Saturday and expressed a desire to reveal a proposal before 4pm on Sunday when financial markets in Asia begin trading.

Congress needed to lift the “cloud of dysfunction and default,” Geithner said.

On ABC News’ This Week with Christiane Amanpour, Geithner added that “this is a critical test for the American political system.  It's a critical test for Congress and for the Republican leaders in Congress, because the eyes of the world are on us.”

Obama and congressional leaders from both parties met at the White House on Saturday morning, and the two branches of government agreed to go their separate ways. Congressional leaders held their own meeting at the Capitol Saturday evening in hopes of fashioning a deal without the White House.

Speaking on ABC Geithner denied reports the White House and Speaker Boehner had agreed on a deal that included $800 billion worth of new tax revenues. Geithner said there had been no deal.  “The president and the speaker got very close.  But there was a whole range of things yet to be resolved at that point when the speaker pulled out on Friday.”

Geithner would not commit to $800 billion in revenue as a figure acceptable to the administration.

“That's a judgment we're going to have to make in looking at the rest of the entire package.  But … I think the voices of reason across the political spectrum are getting stronger now, because you've seen Republicans recognize for the first time -- and I give the speaker a huge amount of credit for this -- that a balanced framework that's acceptable to the American people is going to have to require tax reform that generates more revenues.”