Treasury Secretary Geithner is not happy the Republicans have held the debt ceiling hostage to budget negotiations. In response, Geithner has embarked on a fear mongering campaign via a Debt Limit Letter to Congress promising financial Armageddon if the debt ceiling is not raised.
Here are a few of Geithner’s fear-mongering snips from the letter:
The Honorable Harry Reid
United States Senate
Washington, DC 20510
Dear Mr. Leader:
I am writing to update you on the Treasury Department’s projections regarding when the statutory debt limit will be reached and to inform you about the limits of the available measures at our disposal to delay that date temporarily.
In our previous communications to Congress, we provided regular estimates of the likely time period in which the debt limit could be reached. We can now make that projection with more precision. The Treasury Department now projects that the debt limit will be reached no later than May 16, 2011.
If the debt limit is not increased by May 16, the Treasury Department has authority to take certain extraordinary measures, described in detail in the appendix, to temporarily postpone the date that the United States would otherwise default on its obligations. These actions, which have been employed during previous debt limit impasses, would be exhausted after approximately eight weeks, meaning no headroom to borrow within the limit would be available after about July 8, 2011. At that point the Treasury would have no remaining borrowing authority, and the available cash balances would be inadequate for us to operate with a sufficient margin to meet our commitments securely.
If Congress does not act by May 16, I will take all measures available to me to give Congress additional time to act and to protect the creditworthiness of the country. These measures, however, only provide a limited degree of flexibility—much less flexibility than when our deficits were smaller.
As the leaders of both parties in both houses of Congress have recognized, increasing the limit is necessary to allow the United States to meet obligations that have been previously authorized and appropriated by Congress. Increasing the limit does not increase the obligations we have as a Nation; it simply permits the Treasury to fund those obligations that Congress has already established.
If Congress failed to increase the debt limit, a broad range of government payments would have to be stopped, limited or delayed, including military salaries and retirement benefits, Social Security and Medicare payments, interest on the debt, unemployment benefits and tax refunds. This would cause severe hardship to American families and raise questions about our ability to defend our national security interests. In addition, defaulting on legal obligations of the United States would lead to sharply higher interest rates and borrowing costs, declining home values and reduced retirement savings for Americans. Default would cause a financial crisis potentially more severe than the crisis from which we are only now starting to recover.
For these reasons, default by the United States is unthinkable. This is not a new or partisan judgment; it is a conclusion that has been shared by every Secretary of the Treasury, regardless of political party, in the modern era.
Identical Letters to House Speaker, Others
Geithner sent identical letters to John A. Boehner, Speaker of the House; Nancy Pelosi, House Democratic Leader; and Mitch McConnell, Senate Republican Leader.
Geithner copied key budget chairmen and others in Congress.
Unfortunately, No Serious Repercussions Until July 8
One disappointing aspect of the the situation is nothing terrible happens until July 8. At that time I assure you, Geithner would find another 2 months or even 4 months if necessary.
Unfortunately, long before July 8, I expect Republicans will cave in to Geithner’s fear-mongering tactics.
Not being a politician, I can say what many Republicans undoubtedly want to say but won’t.
Dear Treasury Secretary Geithner, “Please Go to Hell”
Polite Way of Saying “Go to Hell”
If Geithner really believes what he is spouting, Republican ought to take advantage. They can do so far more politely than I suggested.
A politically correct “polite” response would be along these lines:
Dear Treasury Secretary Geithner
In the vital interest of preserving the US dollar and to restore fiscal sanity to the United States of America, we intend to reduce the budget deficit within 10 years.
In the interim, we will not increase the debt limit unless and until the President and Congressional Democrats are willing to cooperate.
In return for raising the debt limit, Congress must pass and the the president must sign legislation that will…
- Scrap Davis Bacon and all prevailing wage laws.
- Pass national right-to-work laws
- Reduce the budget deficit by $5 trillion in 8 years
- Balance the budget in 10 years
Given the unmistakable sincerity in your assessment of the damages that may occur should Congress fail to increase the debt ceiling, we anticipate equal sincerity in your willingness to work with Republicans to balance the budget in 10 years so that Congress will not have to go through these maddening debt-ceiling exercises in years to come.
We await your reply and look forward to working with the Obama administration towards solving our budget crisis.
“Yes We Can” work together.
To prove our sincerity, we will hike the debt ceiling. In return, all you have to do is agree to the four points above with additional limits on the amount of budget balancing that can come from tax hikes.
Cordially and With Utmost Respect
Mike “Mish” Shedlock
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