U.S. Senator from Colorado Michael Bennet, this week asked Treasury Secretary Timothy Geithner what would happen if Congress failed to raise the debt limit. He received a swift reply, and it wasn’t pretty.
“It is absolutely urgent and essential that we craft a comprehensive plan that materially reduces the deficit,” said Bennet. “But as this letter demonstrates, playing politics with the debt limit would rattle the capital markets, blow an even bigger hole in our deficit and would likely throw our economy into another deep recession. That is unacceptable, especially since Congress has the power to prevent it. We need a responsible and comprehensive approach to deficit reduction, not political games that put our country and our economy at risk.”
The Geithner Letter on Debt Limit )pdf) comes in response to a recently-penned letter by Bennet asking Treasury to spell out the economic and fiscal consequences of failing to raise the debt limit.
From The Wall Street Journal:
Some Republicans have questioned whether the Treasury would allow a default to occur, but Mr. Geithner said in the letter that “failure to raise the debt limit would force the U.S. to default on these obligations, such as payments to our service members, citizens, investors, and businesses.”
“This would be an unprecedented event in American history,” he wrote. “A default would inflict catastrophic, far-reaching damage on our Nation’s economy, significantly reducing growth, and increasing unemployment.”
Republicans leaders have said they want to raise the debt ceiling but only if the White House agrees to accompany its major spending cuts. House Speaker John Boehner (R., Ohio) has said it would be “irresponsible” to let the U.S. default, but “it would be more irresponsible to raise the debt ceiling without simultaneously taking dramatic steps to reduce spending and reform the budget process.”