Debt limit hike needn't be a crisis: Geithner

Reuters News
Posted: May 18, 2012 4:23 PM
Debt limit hike needn't be a crisis: Geithner

By Rachelle Younglai

BALTIMORE (Reuters) - U.S. Treasury Secretary Timothy Geithner said on Thursday that raising the debt ceiling did not have to be a crisis as it was last year when partisan bickering over how to do so cost the United States its top credit rating.

"It's not responsible to put at risk people's confidence in the credibility of the United States," Geithner said at the Greater Baltimore Committee group of regional businesses and nonprofit organizations.

The Obama administration is already squabbling with Republicans over how to raise the debt ceiling, with the most powerful Republican in Congress, House Speaker John Boehner, demanding that any raise in the debt limit be exceeded by spending cuts.

The United States is expected to reach the $16.4 trillion debt limit, or amount it is legally allowed to borrow, after the November presidential election and before the end of the year.

But the U.S. Treasury has tools that would push out the deadline until "some time" in early 2013, Geithner said. Raising the debt limit "does not have to be a crisis. It's a crisis of Congress's making," he said.

Last year's protracted battle over how to raise the debt limit pushed the United States to the brink of a default and caused Standard & Poor's to cut the long-term U.S. credit rating by one notch to AA-plus.

When asked how the United States could win back its top-notch credit rating, Geithner said that "depends on what Congress does," and he warned lawmakers they could not take investor confidence in the United States for granted.

Geithner dismissed notions that the threat of a default would give Washington the incentive needed to rein in the U.S. budget deficit, which is on track to top $1 trillion for the fourth year in a row.

Instead he pointed to the simultaneous expiration of tax breaks for nearly all Americans and the $1.2 trillion in automatic budget cuts as "very powerful incentives" for lawmakers to find a way to put the country on a sound fiscal path.

After the November presidential election, the Obama administration and Congress will have less than two months to make crucial decisions on taxes and the budget that could hinder the country's economic recovery.

(Reporting by Rachelle Younglai; Editing by Kenneth Barry)