Geithner says a short-term debt deal is unacceptable to White House

July 24, 2011

Treasury Secretary Timothy F. Geithner warned Sunday that a debt-reduction deal that doesn’t result in raising the nation’s borrowing limit through the 2012 elections remains unacceptable to the White House and cannot win enough Democratic votes in Congress to ensure passage.

His comments came as congressional leaders worked to draw up a two-step plan to increase the debt limit, now set at $14.3 trillion, before Aug. 2, when the nation would default on its spending obligations.

Geithner appeared on a series of political talk shows Sunday to insist that any deal must lift the legal limit on the nation’s borrowing long enough to remove the possibility of a default from the politically heated presidential campaign season.

“There’s nothing wrong with doing this in stages,” he said on CNN’s “State of the Union.” “But what it cannot do is leave the threat of default hanging over the economy.”

Further raising tensions at the start of a critical day of negotiations, House Speaker John A. Boehner (R-Ohio) indicated Sunday that Republicans could push forward with a plan this week, even without Democratic support.

That threat of unilateral action further muddles the ongoing talks among congressional leaders of both parties and the White House on a deal that could get support from all sides.

“I think the preferable path would be a bipartisan plan that involves all the leaders, but it’s too early to decide whether that’s possible,” Boehner said on “Fox News Sunday.”

“If a bipartisan bill is not possible,” he said, “I and my Republican colleagues in the House are prepared to move on our own.”

Under proposals floated by Republicans on Saturday, Congress would cut agency spending by as much as $1 trillion over the next 10 years and raise the debt ceiling by an equal amount. That would give the government the borrowing authority to pay its bills, but only through the end of this year.

The deal would then require Congress to work to reduce the debt by as much as $3 trillion by reforming the tax code and entitlement spending.

Geithner said such a two-step process could be acceptable — but not if it requires a second vote by Congress to lift the debt ceiling in the coming months.

“Inevitably, we’re going to do this in two stages,” he said on CNN’s “State of the Union.” “We’ll lock savings we’ve agreed to. And then there will be a second stage, where Congress is forced to identify and agree on a set of other reforms — tax reform that raises revenue and entitlement reform to make sure we put that on sustainable footing. But the key question is what happens at the end of that first stage.”

On ABC’s “This Week,” Geithner said a deal must be in motion in the House by Monday night to avoid missing the Aug. 2 deadline.

“They need to have a framework that they know with complete confidence will pass both houses of Congress, that is acceptable to the president, and that should happen today,” he said.

Boehner told fellow Republicans on Saturday that he wants to lay out a new two-step proposal to solve the issue before 5 p.m. Sunday, when Asian markets open. But he promised that his proposal would be a new path forward and would be unlike either of the scenarios that have been under consideration so far — the $4 trillion “grand bargain” Boehner was working to negotiate with Obama until talks blew up on Friday, and the “last resort” option proposed by Senate Majority Leader Harry M. Reid (D-Nev.) and Senate Minority Leader Mitch McConnell (R-Ky.) that would shift responsibility for raising the debt ceiling to the president.

But Geithner said Sunday that two options remain for Congress, one resembling the Obama-Boehner deal that was under consideration last week and another that would look like the McConnell-Reid proposal, which would allow the debt ceiling to rise in stages through the next election while a powerful bipartisan legislative commission hammered out a comprehensive strategy to reduce the debt.

Geithner said it wouldn’t even be necessary for Obama to veto a bill that does not raise the debt limit through the election.

Such legislation wouldn’t “make it that far,” he said on CNN. Boehner “needs Democrats for that to work. And [House Minority Leader] Nancy Pelosi has said she will not vote for that approach. And it will not make it’s way through the Senate. So that’s not a viable option.”

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The Take: Debt talks show a breakdown in governing

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