Default Clock Ticking at Wash Post; ‘Running Out of Runway,’ Geithner Says

July 25, 2011 - 10:39 AM

Treasury Secretary Tim Geithner

Treasury Secretary Tim Geithner testifies in the House Small Business Committee on Wednesday, June 22, 2011. (Congressional photo)

(CNSNews.com) – The Washington Post Web site is ticking down the days, hours, minutes and seconds to the debt ceiling deadline – the moment on August 2nd when the Obama administration says the U.S. government will be forced to default on its legal obligations.
 
In fact, it will be up to President Obama to choose which bills to pay and which not to pay. Default is an option, but it’s unlikely the administration would refuse to pay the interest on the national debt.

The U.S. Treasury, however, is sounding an alarmist note. If Congress fails to increase the U.S. credit limit, “the government would have to stop, limit, or delay payments on a broad range of legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and many other commitments,” the Treasury Department says on its Web site.

The Obama administration says defaulting on those legal obligations would cause "severe hardship" for American families, precipitate another financial crisis, and call into question the full faith and credit of the United States government.

Treasury Secretary Timothy Geithner – and President Obama -- both insist that Congress raise the debt limit in one step, lifting the nation’s borrowing authority for 18 months, beyond the 2012 election.

But House Speaker John Boehner on Sunday advocated a two-step process that would include immediate spending cuts and a short-term, six-month hike in the debt limit, to be followed by another round later.

Geithner wanted no part of it when he spoke to Fox News on Sunday: “Here we are seven months later, we're running out of runway. We're almost at the edge. I never thought they would take it this close to the edge and let politics get in a way of demonstrating -- well, will we pay our bills on time?”

If the government’s borrowing authority is not lifted by Aug. 2, it would be up to Geithner and Obama to decide which bills get paid.

Chris Wallace, the host of "Fox News Sunday," asked Geithner straight-out, “What’s your plan for default?”

“Our plan is to get Congress to raise the debt ceiling on time,” Geithner dodged.

“That's not a plan,” Wallace replied.

Geithner said Congress will come through, because “that’s what’s always happened. It will happen this time, too.”

And if Congress does not raise the nation’s debt limit, Geithner said the administration will not be able “to protect the American people from the consequences” of congressional inaction.

Geithner noted that the U.S. writes 80 million checks a months. “There are millions and millions of Americans that depend on those checks coming on time -- not just people from the military, but people who get Social Security benefits, Medicare and Medicaid benefits. And we cannot put those payments at risk and we do not have the ability to limit the damage on them if Congress fails to act in time.”

Wallace tried again to ask Geithner what he’ll do if Aug. 2 arrives without Congress raising the debt limit. “It would be irresponsible not to have a plan,” he told Geithner. “The president says you have a plan. What is it?”

“Again, we will do everything we can to mitigate the damage,” Geithner responded. “But I want to be very clear, Congress will be putting 80 million checks payments at risk of delay and that would not be responsible.”

Geither repeated that the “only option for the country” is for Congress to raise the debt limit by Aug. 2.

Wallace asked Geithner one more time, “Have you made plans as to who will get their checks and who won't get their checks?”

“Chris, we are doing the responsible thing but that's not -- the important thing is to recognize that we do not have the ability -- only Congress has the ability to make sure that people get the payment on time. Only Congress has the ability to demonstrate that we're going to pay our bills as a country. We're going to meet all our obligations on time.”

Republican 2-step

Also appearing on Fox News Sunday, House Speaker John Boehner said there will be a “two-stage process” in raising the national debt. Boehner suggested that the president is more worried about the next election than he is about the country.

Wallace asked Boehner if, by passing a six-month increase in the debt limit, Republicans will be daring the Senate and White House to block it.

“Chris, this is about what is doable at the 11th hour,” Boehner responded. He pointed to the fact that House Republicans have done their work by passing a budget and a deficit-reduction plan, neither of which passed the Senate.

“And not one time in this whole process have the Senate Democrats or the White House passed a budget, put a budget out there, or even put a plan out there,” Boehner said. “The conversations I was having with the president, in case the Senate didn't pass “Cut, Cap and Balance” -- there was never any plan from the White House. The whole plan came from us. We laid out the framework. And at some point they have got to lay their cards on the table.”

As of Monday morning, House Republicans were working on their own deficit-reduction, debt-ceiling plan – presumably, the “two-step” plan.  They are expected to release a broad outline of that plan later today.

Senate Democrats also are working on a plan advanced by Majority Leader Harry Reid. "We are putting together a $2.7 trillion deficit reduction package that meets Republicans’ two major criteria: it will include enough spending cuts to meet or exceed the amount of a debt ceiling raise through the end of 2012, and it will not include revenues," Reid said on Sunday.