Geithner Warns on Debt Ceiling: Time’s Almost Up
Policy + Politics

Geithner Warns on Debt Ceiling: Time’s Almost Up

AP Photo/Evan Vucci

Treasury Secretary Timothy Geithner said on Thursday he’s looked at all available options, but there’s “no way to give Congress more time to solve this [debt ceiling] problem. We are running out of time.” 

Geithner, who met with Senate Democrats on Capitol Hill, emphasized that both parties need to “stand together” and “send a definitive signal” so that lawmakers take the steps necessary to avoid what would be the country’s first-ever default.

As Congress faces the August 2 deadline to raise the government’s $14.3 trillion borrowing authority, lawmakers remain at a stalemate over a deficit reduction package. The Obama administration says a new debt ceiling needs to extend to the end of 2012 and would require raising it by about $2.4 trillion. The Treasury has implemented a series of financial aid and bookkeeping maneuvers to help stave off the possibility of default. Geithner, along with Federal Reserve Chairman Ben Bernanke, have warned that failure to raise the debt ceiling could send shockwaves throughout the financial community and lead to massive job losses, while some Republicans, including GOP presidential hopeful Rep. Michele Bachmann, R-Minn., have pooh-poohed the concerns as political grandstanding.

On Wednesday, Moody's Investor Services announced that it’s put the U.S. government’s top-notch credit rating on review for a possible downgrade, pending the outcome of the debt ceiling talks.

Fifth Meeting of the Week
Even after President Obama abruptly walked out of the debt negotiations Wednesday evening, he and frustrated congressional leaders are scheduled for a fifth meeting in as many days to try to reach agreement. No “hallelujah moment” is likely by the end of Friday, however, according to White House spokesman Jay Carney. He said Friday’s meeting is designed to “make an assessment about whether we are moving forward.”

Also on Thursday, Democrats took aim at Eric Cantor, House Majority Leader, R-Va., and other conservatives, with Senate Majority Leader Harry Reid, D-N.V., announcing that Cantor “shouldn’t be at the negotiating table” and calling him “childish.” Sen. Chuck Schumer, D-N.Y., said Cantor has “not been constructive” in the debt negotiations. Cantor shrugged off the criticism.

“We have been in this fight together,” Boehner said, putting his arm around Cantor at a news conference. “Any suggestion that the role Eric has played in the meetings has been anything less than helpful is just wrong. Listen, we are in the foxhole. I’m going to tell you what. This is not easy.”

Balanced Budget Amendment and the Pledge on Taxes
Republicans leaders, meanwhile, continue to demand that any increase in the debt ceiling must be matched by spending cuts and have pledged not to raise taxes. There is also a growing consensus among the GOP that a balanced budget amendment to the Constitution should be a prerequisite to raising the debt ceiling, creating a wrinkle in the already contentious budget negotiations.

“Unfortunately there is a small group of Republicans who are calling the shots, who are putting their extreme ideology over the interest in the families of Nevada and over this country,” said Harry Reid.

Conservatives argue that a constitutional amendment is the only way to structurally change the budget process. “I hope the President and Democratic leaders can make sure we can pass this and send it to the states” for ratification, Boehner said.

The House will vote on a balanced budget amendment next week and Senate Majority Leader Mitch McConnell, R-Ky., will force a Senate vote as well. All 49 Senate Republicans have signed onto a balanced budget amendment authored by Utah senators Orrin Hatch and Mike Lee. Twelve Senators and 36 House members have signed the “Cut, Cap and Balance” pledge that forces Congress to pass a balanced budget amendment as a precondition to raise the debt ceiling.

Passage of the balanced budget amendment seems unlikely, since it would need to be ratified by three-fourths of the states.  No Democrats have signed on to the amendment; Republicans need at least 20 additional votes to reach the 67 vote threshold to amend the constitution. The most recent amendment to the Constitution was ratified in 1992, limiting Congressional pay raises until the start of the next term of office. 

Earlier this week McConnell offered his own “last choice” option should leaders not be able to reach  a deficit reduction agreement on the debt ceiling by August 2. Under his plan, the President would be to raise the debt ceiling by $2.4 trillion in three increments through the 2012 election. His plan was immediately assailed by conservatives who said it’s a sell-out to the White House and promised to oppose it.

While Democrats on Capitol Hill welcomed McConnell’s plan, for the first time today Boehner didn’t rule it out. “What may look like something less than optimal today, if we are unable to get to an agreement, might look pretty good a couple of weeks from now,” he said. “Itt’s worth keeping on the table.”

Read more on the Debt Ceiling from The Fiscal Times
Obama Walks out of Debt Ceiling Talks
Bullish Bernanke Says Economy Will Snap Back
How Obama’s Social Security Changes Will Hurt You