On Monday, the U.S. government will hit the $14.294 trillion debt ceiling established by Congress. The good news is Treasury Secretary Tim Geithner recently said America can continue to make good on its debt payments without an increase in the debt ceiling until Aug. 2, nearly a month longer than previously thought. (See: Debt Ceiling Deadline Pushed Back: Will the GOP Budge?)
The other news is several Republican Congressman continue to say they won't vote to increase the debt ceiling and have accused the Obama administration of using scare tactics to force an increase.
"Many conservatives, including some GOP freshman who campaigned in 2010 against raising the debt limit, say [Geithner] is exaggerating the danger," The WSJ reports. "They note that Mr. Geithner has already postponed the deadline once, and they insist the U.S. can find ways to shift its money around and cut some spending immediately to avoid cataclysmic consequences."
Geithner has said failure to raise the debt ceiling would have a "catastrophic economic impact."
As Henry and I discuss in the accompanying clip, it's incredibly irresponsible for any politician to even think about forcing the U.S. to default on its debt, which would result in sharply higher borrowing costs for all Americans — and that's a best-case scenario.
"The worst outcome would be one in which the financial system would be again destabilized, which we saw in Lehman, which would have extremely dire consequences for the rest of the economy," Fed Chairman Ben Bernanke said during a Senate Banking Committee hearing Thursday. "Using the debt limit as a bargaining chip is quite risky."
But if the Republicans are wrong for "playing chicken" with the debt ceiling — and for insisting tax hikes are a non-starter in any budget reform -- President Obama and the Democrats are equally wrong for refusing to negotiate spending cuts as part of a deal to get the debt ceiling raised. The Democrats' failings are even worse if Republicans are correct that "the deadline was created for political reasons," as the WSJ reports.
This kind of bipartisan absurdity is a big reason why so many Americans are deeply cynical about government. As citizens and taxpayers, we deserve much better from our elected officials who are playing with fire.