Posted on Tuesday, January 11, 2011
WASHINGTON — The Obama administration warned Congress on Thursday that the government would reach its legal borrowing limit as early as the end of March and no later than May 16 and urged House and Senate leaders to move quickly to raise the debt ceiling to avoid an unprecedented default.
The Treasury secretary, Timothy F. Geithner, sent a formal notification to Capitol Hill a day after a new Congress convened with Republicans now holding a majority in the House and a larger minority in the Senate, and with many of the newcomers pledged to vote against any increase in the debt limit.
Raising the limit is among the least popular actions that Congress must take, and legislative brinkmanship between presidents and lawmakers has played out a number of times in past decades. The coming months promise to add another chapter to the history of budget showdowns: Republicans have said that they will try to force President Obama to accept deep cuts in domestic spending as the price for enough Republican votes to lift the limit.
“The American people will not stand for such an increase unless it is accompanied by meaningful action by the president and Congress to cut spending and end the job-killing spending binge in Washington,” the new House speaker, Representative John A. Boehner, Republican of Ohio, said in a statement on Thursday.
On Tuesday, the House approved the new rules of Republicans, effectively making it harder to pass a debt-limit increase. No longer will an increase be automatic with passage of a budget resolution; it will have to be voted on separately.
Treasury officials, in a briefing for reporters, said the administration was leaving to Congress the decision on how much to raise the limit.
Mr. Geithner, in his letter to Congressional leaders of both parties, said the outstanding gross national debt stood at $13.95 trillion, $335 billion below the $14.29 trillion debt limit that Congress set last February. That “headroom,” as he called it, is enough to get through the first quarter, but exactly when the government will hit the ceiling this spring depends on the strength of the economy and the amount of tax revenue flowing into the Treasury.
“Failure to increase the limit would be deeply irresponsible,” Mr. Geithner wrote, and added: “It is important to emphasize that changing the debt limit does not alter or increase the obligations we have as a nation; it simply permits the Treasury to fund those obligations Congress has already established” — under presidents and Congresses of both parties.
He listed several “exceptional actions” that the Treasury could take to delay hitting the limit — as the Clinton administration under former Secretary Robert E. Rubin did in the mid-1990s when it faced a recalcitrant Republican-controlled Congress. But those steps would buy only several weeks, Mr. Geithner added.
A failure to increase the limit in time would force the Treasury to default on legal obligations and payments to bondholders here and abroad “causing catastrophic damage to the economy,” Mr. Geithner said, threatening the dollar and stopping payments for a range of federal benefits, including military salaries, Social Security and Medicare.
“Given the gravity of the challenges facing the U.S. and world economies, the world’s confidence in our creditworthiness is even more critical today,” Mr. Geithner said.
By JACKIE CALMES, NEW YORK TIMES