House Speaker John Boehner fired the opening shot Tuesday in a new potential fight with Democrats over the US debt ceiling, which is scheduled for an increase at the end of this year.
But Treasury Secretary Timothy Geithner warned Boehner against setting up a debt limit showdown, saying the potential fallout of such an end-of-year confrontation could harm the economy’s fragile recovery.
“I will again insist on my simple principle of cuts and reforms greater than the debt limit increase,” Boehner told a fiscal summit hosted by the Peter G. Peterson Foundation.
“This is the only avenue I see right now to force the elected leadership of this country to solve our structural fiscal imbalance,” he said, adding: “We can make the bold cuts and reforms necessary to meet this principle, and we must.”
He called the debt ceiling vote an “action-forcing event” in which Washington will have to make tough choices.
But Geithner expressed hope that Congress, which must approve any raise in the federal debt ceiling, would manage to do so without “the drama and the pain and the damage they caused the country last July.”
Speaking at the same event, he said it was “not responsible” to raise doubts over whether the nation would be able to pay back money it has borrowed.
“We have to make sure we do that in a way that does not undermine recovery, does not set us back on this path to healing the damage caused by the crisis and gives us the room and the ability to invest” in key social programs and infrastructure, Geithner said.
Lawmakers reached an eleventh-hour agreement last year after an intense legislative battle that narrowly averted a default by raising the ceiling by about $2.1 trillion, enough to pay the government’s bills until after the November presidential elections.
US sovereign debt then stood at $14.294 trillion. It is $15.632 trillion today.
The protracted fight led to Standard and Poor’s downgrading the US credit rating a notch from “AAA,” the best possible, to “AA+.”
Congress will tackle the debt ceiling around the same time it faces the expiration of tax cuts enacted during the administration of president George W. Bush that Republicans want to renew.
“Any sudden tax hike would hurt our economy. So this fall, before the election, the House of Representatives will vote to stop the largest tax increase in American history,” Boehner vowed.
While Republicans continue to demand deep budget cuts, Democrats hope to prevent crippling cuts to social programs.
“The American people have had enough of this brinkmanship,” Democratic Senate Majority Leader Harry Reid shot back.
“They want us to get things done. And it’s pretty clear to me that the tea party direction of the Republican Party is driving them over a cliff,” he added, referring to ultra-conservative wing of the party.
President Barack Obama will hold a bipartisan meeting Wednesday with Boehner and Senate Minority Leader Mitch McConnell, along their Democratic counterparts Reid and House Minority Leader Nancy Pelosi.
The president plans to use the talks to push Congress to act on some of his job creation measures currently stalled on Capitol Hill, including a plan to offer tax cuts to spur small businesses to hire new workers.
Boehner used his appearance at the Washington event to criticize Obama’s budget policies.
“Knowing what’s right and doing what’s right are different things,” he said. “The difference between knowing what’s right and doing what’s right is courage, and the president, I’m sorry to say, lost his.”
[House Speaker John Boehner speaks at the 2012 Fiscal Summit in Washington, DC. AFP Photo/Brendan Hoffman]