Treasury Secretary Timothy Geithner said Monday that the government could default on its obligations as soon as mid-February, a warning issued hours after President Obama appealed for Congress to raise the borrowing limit with as little drama as possible.
In a letter sent to congressional leaders, Geithner said that lawmakers might have just one month to raise the $16.4 trillion debt ceiling and that the Treasury Department is close to exhausting its “extraordinary measures” to avoid default.
Geithner chided any member seeking to use the debt limit to gain fiscal leverage. He called it the height of irresponsibility and a strategy that puts millions of Americans at economic risk.
At a Monday press conference, Obama said he had no interest in negotiating with Republicans demanding major spending cuts in exchange for a rise in the debt limit.
But his remarks carried little sway with congressional Republicans dead set on extracting major spending concessions from the president.
Obama said raising the ceiling was about paying for bills the Congress has already rung up, and he argued it would be disastrous for the economy — which is finally showing signs of lifting off — not to raise the debt limit.
“The issue here is whether or not America pays its bills. We are not a deadbeat nation,” he said.
Just days away from beginning his final term, Obama has insisted he will not repeat the summer talks of 2011 and negotiate with Republicans over raising the debt ceiling. He tried on Monday to place the burden of the limit squarely on Congress’s shoulders.
“They will not collect a ransom in exchange for not crashing the American economy,” Obama said of Republicans.
However, Republicans immediately responded to his remarks by doubling down on their demands that spending cuts accompany any ceiling hike.
Senate Minority Leader Mitch McConnell (R-Ky.) responded by saying that the White House and its allies “need to get serious about spending, and the debt-limit debate is the perfect time for it.”
And Speaker John Boehner (R-Ohio) vowed that the House would pass legislation that increases the debt limit and cuts spending.
“The American people do not support raising the debt ceiling without reducing government spending at the same time,” he said in a statement.
Obama repeatedly emphasized that an increase to the borrowing limit is not an increase in spending, and that he would be happy to discuss deficit reduction with both parties separate from the looming threat of the debt limit.
He received support for his argument later in the day from Federal Reserve Chairman Ben Bernanke. Speaking in Michigan, Bernanke echoed the president’s message and emphasized the importance of Congress not playing games with the limit.
“Not raising the debt ceiling is sort of like a family saying … ‘We just won’t pay our credit card bills,’ ” he said. “It’s very, very important that Congress take necessary action.”
Voting to raise the debt limit has always been politically precarious, and the president voted against doing so himself in 2006 as a U.S. senator. But Obama maintained that the last debt-limit fight, during the summer of 2011, represented new and dangerous territory.
“We have never seen the debt ceiling used in this fashion, where the notion is ‘You know what, we might default unless we get 100 percent of what we want,’ ” he said.
Obama also cast aside the idea that the White House could do anything on its own to get around it.
“I understand the impulse to try to get around this in a simple way, but there’s one way to get around this,” he said. “And that is for Congress to authorize me to pay for those items of spending that they have already authorized.”
Underlying the president’s remarks was a frustration with how Washington policymakers have struck deals, setting off pressing deadlines with new deadlines down the road, creating a fresh set of ticking clocks to loom over the nation and its economy.
“We’ve got to break the habit of negotiating through crisis over and over again, and now’s as good a time as any,” he said.
Obama warned that if Congress doesn’t raise the debt ceiling, Social Security checks might not go out and troops overseas might not be paid. He also said investors would lose confidence in the economy and markets could crash.
“Investors around the world will ask if the United States of America is, in fact, a safe bet,” he said. “Markets could go haywire; interest rates could spike.”
A failure to raise the limit in time could “impose severe economic hardship on millions of individuals and businesses across the country,” Geithner wrote.
This story was posted at 11:58 a.m. and updated at 8:21 p.m.