The Wall Street Journal
By: Neil King Jr. & Luca Di Leo
April 18, 2011
WASHINGTON--Treasury Secretary Timothy Geithner said Republican leaders have assured the White House they are prepared to lift the debt ceiling in time to avoid disruptions to capital markets and a potential credit default.
In interviews aired on the Sunday talk shows, Mr. Geithner said House Speaker John Boehner and other senior Republicans told President Barack Obama in discussions last week that they were aware of the risk of a credit default and were open to lifting the limit even in the absence of a comprehensive deal to slash the country's debt load.
The White House has promised to push ahead on a sweeping long-term deal to pare government spending, but officials say that might not come together until late June at the earliest. The Treasury Department says the U.S. will exceed the current limit, now set at $14.3 trillion, by mid-May and could default on its debt in early July if no action is taken to raise the ceiling.
Mr. Geithner said the two pursuits--sealing a long-range deal and lifting the ceiling--may have to run on parallel tracks. "But if by the time we need to raise the debt limit, we haven't worked all that out, Congress still has to raise the debt limit," Mr. Geithner said on NBC's "Meet the Press." Republican leadership, he said, "recognizes that."
But differences remain between the two sides on what steps will be needed to reach agreement on lifting the debt limit. Republicans are reluctant to let the leverage of the ceiling-limit pass without forcing another round of spending cuts, and Mr. Obama has acknowledged that Republicans won't agree to lift the debt limit without at least another round of spending cuts.
House Budget Chairman Paul Ryan (R., Wis.), whose cost-cutting budget blueprint passed the House Friday, said on CBS's "Face the Nation" that Republicans want "financial controls" and "cuts in spending" in order to agree to a lifting of the debt limit.
"Nobody wants to play around with the country's credit rating," he said. 'We just want some cuts and controls going forward."
Oklahoma Republican Sen. Tom Coburn, one of the Group of Six senators from both parties who are trying to craft a budget compromise, said on Fox News Sunday that he would vote against lifting the debt ceiling unless there was "absolute certainty that we have made critical changes necessary to put the country back on track."
Sen. Rand Paul signaled a compromise on spending cuts in Congress was possible. The tea-party backed Republican from Kentucky has vowed to oppose raising the debt ceiling unless it comes along with an agreement on budget cuts. "Conservatives have to accept some cuts to military spending, while liberals must accept some cuts to domestic welfare," he said on CNN.
Mr. Geithner warned Republicans on Capitol Hill not to push their leverage too far. "Those people up there [in Congress] who are telling people that you can take this to the brink, because it gives us some leverage, they're going to own the responsibility for the risk that creates for the American economy," he said.
Rep. Chris Van Hollen of Maryland, the ranking Democrat on the Budget Committee, gave a similar warnings on Fox, saying that it was "playing Russian roulette" to firmly link the debt-ceiling vote to the tougher negotiations over a long-term budget deal.
Mr. Geithner, appearing on ABC's "This Week," said that failure to lift the ceiling would tip the economy into a crisis that would make the last one look "tame."
Speaking about a broader deal to cut the budget deficit, which Mr. Obama aims to reduce by $4 trillion over the next decade, Mr. Geithner said the U.S. can afford to cut spending without hurting the recovery. But he signaled the wealthy would have to shoulder most of the burden, saying the country can't afford to further extend tax cuts for the richest 2% of Americans.
The only way in which the U.S. could afford extending the Bush-era tax cuts further would be by "cutting very, very deeply into basic benefits for seniors, the disabled, the poor" or by "borrowing trillions of dollars from the Chinese," Mr. Geithner said. China holds a big share of Treasury bonds the U.S. has issued to finance its expenses.
The International Monetary Fund earlier this week took an unusually tough tone with the U.S. in its economic outlook, warning that the country's debt problems could destabilize the global financial system. The IMF said the U.S. could once again be the epicenter of global financial woes if the government doesn't soon draft a credible medium-term plan to slash its mountain of debt and bloating deficit.
Write to Neil King Jr. at firstname.lastname@example.org and Luca Di Leo at email@example.com