Geithner: Damage From Debt Default ‘Irrevocable’

Saturday, 14 May 2011 01:32 PM

 

  Comment  |
   Contact  |
  Print   |
    A   A  
  Copy Shortlink
May 14 (Bloomberg) -- U.S. Treasury Secretary Timothy F. Geithner said a default arising from failing to raise the debt limit could cause “irrevocable damage” to the economy, risk a “double-dip” recession and increase unemployment.

“Default would not only increase borrowing costs for the federal government, but also for families, businesses and local governments -- reducing investment and job creation throughout the economy,” Geithner said in a letter dated yesterday to Senator Michael Bennet, a Colorado Democrat.

Failing to raise the $14.29 trillion debt ceiling would “force the United States to default” on obligations such as payments to service members, citizens, investors and businesses, Geithner wrote. “This would be an unprecedented event in American history. A default would inflict catastrophic, far- reaching damage on our nation’s economy, significantly reducing growth and increasing unemployment.”

The U.S. is scheduled to reach the debt limit May 16 and can keep borrowing until about Aug. 2 by taking steps that include declaring a “debt-issuance suspension period” under the statute governing the Civil Service Retirement and Disability Fund, Geithner said May 2. That would allow the U.S. to redeem existing Treasury securities held by that fund as investments.

Cuts Debated

Democrats and Republicans are debating how much to trim the deficit and whether to extend the debt ceiling. Senate Minority Leader Mitch McConnell, a Kentucky Republican, said May 12 he wants “significant” near-term cuts in federal agency budgets paired with longer-term reductions to programs like Medicare and Medicaid in exchange for his support for an increase in the debt limit.

“Even a short-term default could cause irrevocable damage to the American economy,” Geithner said in response to a letter from Bennet requesting an estimate of the consequences of failing to increase the limit.

Raising the debt ceiling “does not authorize new spending commitments,” Geithner said. “It simply allows the government to finance existing legal obligations that Congresses and presidents of both parties have made in the past.”


© Copyright 2014 Bloomberg News. All rights reserved.

  Comment  |
   Contact  |
  Print   |
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
Top Stories
You May Also Like

Mali's Islamists Withdraw Cease-Fire Pledge

Friday, 04 Jan 2013 13:06 PM

Tens of thousands of Fatah supporters rallied in the Hamas stronghold of Gaza on Friday for the first time since they we . . .

Fmr. CIA Director Hayden: Iran Nuclear Crisis Gets 'Scarier'

Tuesday, 17 Jul 2012 18:11 PM

 . . .

Join Fmr. CIA Director for Special Iran Briefing, Assess the Danger

Friday, 13 Jul 2012 12:27 PM

 . . .

Most Commented

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved