Lawmakers who give President Barack Obama increased spending limits should demand a balanced budget in exchange, says investment banker and author Christopher Whalen.
Not raising the government's debt ceiling would grab headlines, but it's not as big of a deal as most people think it is.
While it gives mainly House Republicans leverage on negotiating with the White House, the Treasury, for example, can still work around selling debt by running the government on cash and other assets.
Plus the world really can't punish the U.S. financial system since there is no other market in the world to serve as an alternative.
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"In theory the Treasury shouldn't issue any more debt. But they have ways of managing cash and assets, so they can continue the operations of government probably for at least three months," Whalen tells Newsmax.TV.
Some Republicans, however, say they're going to fight raising the ceiling unless they see substantial spending cuts.
"I think they should only be willing to accept a deal that gets us to a balanced budget," says Whalen, who just published a new book, “Inflated: How Money and Debt Built the American Dream.”
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"They should have agreements from Barack Obama that a balanced budget is going to be in the very near future. In fact, I'd like to see it before the election. Whether or not we can get it out of the Congress is another matter but I think it should be debated."
Treasury Secretary Timothy Geithner says he's confident Congress will raise the $14.3 trillion debt ceiling.
Republicans, meanwhile, say they'll demand spending cuts.
"In addition to raising the debt limit we want financial controls, we want cuts in spending accompanying a raising of the debt ceiling," says Representative Paul Ryan, R-Wis.,who heads the House Budget Committee, according to Reuters.
For Whalen, Congress will likely hike the debt ceiling although not by very much.
"We're going to come back to this issue every six months, so we should probably get used to that," he says.
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