As of Monday, the United States had hit its legally allowed debt ceiling. Treasury Secretary Tim Geithner has begun borrowing from the pension funds of federal employees — money that by law will have to be replaced — in order to keep things afloat, but he warns that he will run out of such options around the beginning of August.
“Even a short-term default could cause irrevocable damage to the American economy,” Geithner says, warning that it could lead to a double-dip recession or worse.
However, some Republicans, including House Majority Leader Eric Cantor, are trying to downplay the significance of that date. As Bloomberg reports:
“Cantor said he wasn’t concerned about a negative reaction by the bond market if talks between congressional leaders and President Barack Obama continue closer to the date Treasury says it can no longer borrow money to pay U.S. obligations.
“As long as we are being focused and smart about the proposals we’re focusing on, I believe the markets will respond positively,” Cantor told reporters during a visit in Chicago to the Global Command Center of CME Group Inc., the world’s largest futures market.”
However, that’s not what the president had to say about the matter:
For the record, the debt ceiling had to be raised 17 times under Ronald Reagan.
– Jay Bookman