Jan

7

Geithner issues apocalyptic warning:

Defaulting would lead to 'significant' taxes and the loss of 'millions of jobs,' Tim Geither warns Congress. AP Photo Close
Tim Geithner has message for the 112th Congress: The sky really is falling.

President Obama's blunt Treasury secretary has dispatched a doomsday missive to congressional leaders, detailing the very bad things that will happen to the country – a default and global economic cataclysm – if the GOP fails to increase the debt limit to $14.29 trillion this spring.

Geithner, responding to a request by Senate Majority Leader Harry Reid (D-Nev.), outlined a handful of painful short-term stopgaps to increase the "headroom" needed to fund day-to-day operations and fulfill the country's fiscal obligations, including such "exceptional actions" as suspending shares of state and local Treasury securities and suspending investment in several important funds, including the federal retirement system.

If the debt ceiling isn't increased by the end of May, Geithner predicted a "catastrophic" U.S. default that would sink the global economy.

"Never in our history has Congress failed to increase the debt limit necessary," Geithner wrote, in an appeal to some Republicans who say they won't vote for the increase unless it's linked to Draconian cuts in social programs.

"Default would effectively impose a significant and long-lasting tax on all Americans … and lead to the loss of millions of jobs," he said.

Still, several Geithner aides told reporters Thursday morning that his warning, while chilling, was nothing new: Treasury secretaries have been issuing them for years.

"This is absolutely standard practice," said one official, who said Geithner will intensify his direct lobbying appeals to individual Congressional holdouts – although the administration isn't ready to link the ceiling vote to specific spending concessions.

"This is a periodic matter that kicks up a lot of dust and dirt. … It will get done in the end," predicted the official, who deemed failure to pass the measure "unthinkable."

However, there is growing anxiety, especially among House and Senate liberals, that the administration will soon switch from chicken-little mode to just plain chicken, and agree to a broad range of cuts to core programs for the poor and unemployed.

"They Republicans are putting us in a vise," Rep. Elijah Cummings (D-Md.) told POLITICO late last month.


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