Treasury Secretary Timothy F. Geithner said the U.S. would face a crisis worse than the one it just experienced if Congress fails to raise the debt limit promptly.
“You will shake the basic foundations of the entire global financial system,” Geithner told a Senate subcommittee today. “I’m totally confident that Congress will act to avoid that.” It would be “inconceivable” that lawmakers will not act in time, he said.
The Treasury chief appeared before a Senate Appropriations Committee panel as House and Senate negotiators, joined by the White House, are considering plans to reduce the budget by about $33 billion. Lawmakers have passed $10 billion in cuts so far for the fiscal year.
Geithner told Congress yesterday that the $14.29 trillion debt limit is projected to be breached no later than May 16, with Treasury having emergency measures to gain an additional eight weeks of borrowing room after that. If Congress does not raise the limit in time, the U.S. would need to cut critical payments and would see a surge in interest rates, Geithner said today.
“The consequences of that would be catastrophic to the United States,” Geithner said. “It would make the crisis we went through look modest in comparison.”…