The U.S. is on track to hit its debt ceiling May 16, but Treasury Secretary Tim Geithner announced this week the U.S. can keep borrowing until Aug 2 vs. the prior forecast of July 8.
Geithner cited "stronger-than-expected tax receipts" for the deadline revision, which is good news about the state of the U.S. economy. (He also cited "extraordinary measures" such as stopping the issuance of State and Local Government Series bonds, which fund infrastructure and other projects.)
The bad news is the deadline extension means there will likely be (yet) another month of political brinkmanship over the debt ceiling vote.
"Any attempt by either party to use the full faith and credit of the United States as a bargaining chip to advance partisan policy agendas would be irresponsible," Geithner said. "Default by the United States on its obligations would have a catastrophic economic impact."
Other notables, including Jamie Dimon, Bill Gross and Warren Buffett, have made similar comments and the general consensus is Congress will eventually vote to raise the debt ceiling.
But never say "never." Several Republicans, including Senators Pat Toomey and Jim DeMint, have said they won't succumb to such "scare tactics," Bloomberg reports.
As Dan Gross and I discuss in the accompanying clip, there's still a chance Congressional Republicans will stand on principle and refuse to vote to raise the debt ceiling unless President Obama and the Democrats make major concessions on government spending.
Presumably, having (nearly) an extra month to haggle will give both parties time to haggle out an agreement. But logical and rationality don't always hold sway in Washington these days, in case you hadn't noticed.
- Tim Geithner
- Senators Pat Toomey
- full faith and credit
- extraordinary measures
- Jim DeMint
- Jamie Dimon