Treasury Secretary Timothy Geithner warned congressional leaders Thursday that the government could reach its borrowing limit by spring and failure to raise it could affect millions of American jobs.
The government will reach the limit between March 31 and May 16, Geithner said in a letter to congressional leaders. Not increasing the $14.3 trillion debt limit could lead to job losses, he said. Inaction could drive up interest rates and make it more costly for U.S. companies to borrow money.
Geithner's warning is directed chiefly at Republicans, who are vowing to block an increase in the debt limit and use the fight to restrain government spending.
House Speaker John Boehner said spending cuts and reforming a broken budget process must come first. Those are the top priorities for the new Republican majority in the House.
"While America cannot default on its debt, we also cannot continue to borrow recklessly, dig ourselves deeper into this hole and mortgage the future of our children and grandchildren," Boehner, an Ohio Republican, said in a statement.
Geithner warned that a failure to raise the debt limit would mean the government would not be able to make the payments on the current debt, which stands at $13.96 trillion.
Treasury debt is considered the safest investment in the world because the U.S. government has never defaulted. However, the effort to raise the debt limit is expected to be especially contentious this time. Many newly elected Republicans campaigned against the government's soaring deficits and debt.
"Even a very short-term or limited default would have catastrophic economic consequences that would last for decades," Geithner said.
"For these reasons, I am requesting that Congress act to increase the limit early this year, well before the threat of default becomes imminent."
Geithner said if a default were to occur, it would be "potentially more harmful than the effects of the financial crisis of 2008 and 2009" which helped push the country into the deepest recession since the 1930s.
Treasury officials said various bookkeeping maneuvers could buy perhaps another eight weeks once the debt ceiling is hit.
In his letter, Geithner sought to draw a distinction between a government shutdown, which occurs when Congress cannot pass a budget to fund operations, and a debt default, which means the government does not have the money needed to pay existing debt obligations as they come due.
Government shutdowns have occurred in the 1980s and 1990s when Congress and the administration were battling over budget issues, but a government default has never occurred.
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