NEW YORK (CNNMoney) -- Treasury Secretary Tim Geithner on Thursday urged lawmakers to act soon to increase the debt ceiling, warning that failure to do so would be disastrous for the economy and for Americans.
In a letter to congressional leaders, Geithner said Treasury estimates that U.S. borrowing needs could push the amount of debt past the legal borrowing limit of $14.294 trillion sometime between March 31 and May 16.
The debt ceiling has never been reached. But failure to do so would prohibit Treasury from borrowing any more money. Barring immediate and draconian policy changes, the country would be unable to pay its bondholders or fund programs and benefits in full. That's because there wouldn't enough tax revenue coming in to cover all of the country's bills.
Experts say the cascade effect would be crippling not only to the U.S. economy but very likely to economies and markets worldwide.
At a minimum, a default could pummel U.S. bonds, the dollar and U.S. investors' portfolios. And that, in turn, could create a debt crisis for the United States that would likely be even harder to combat than the financial crisis of 2008.
"Even a very short-term or limited default would have catastrophic economic consequences that would last for decades," Geithner wrote.
Borrowing costs would rise across the board -- for the federal, state and local governments, for businesses and consumers, he said. Millions of jobs could be lost and stock prices, home values and retirement savings would suffer, Geithner said.
While Treasury has certain measures it can take to postpone a breach from occurring, Geithner said they would only last "several weeks."
The debt ceiling is a cap set by Congress on the amount of debt the federal government can legally borrow. The cap applies to debt owed to the public (i.e., anyone who buys U.S. bonds) plus debt owed to federal government trust funds such as those for Social Security and Medicare.
The debate over whether to raise the cap has often been a political dogfight. But the upcoming debate is expected by some to be "all-out war" as some newly minted Tea Party lawmakers and seasoned conservatives plan to use the opportunity to force spending cuts in exchange for their votes, while others have flatly said they will not vote for an increase.�
This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php
Five Filters featured site: So, Why is Wikileaks a Good Thing Again?.
No comments:
Post a Comment