Geithner Urges Increase in Debt Limit, Warns of U.S. Default Consequences

Treasury Secretary Timothy F. Geithner said lawmakers must raise the federal borrowing limit in the first quarter of 2011 or risk a default on U.S. debt and a loss of access to global credit markets.

A failure to act would cause “catastrophic damage to the economy, potentially much more harmful than the effects of the financial crisis of 2008 and 2009,” Geithner said in a letter to Speaker of the House John Boehner, Senate Majority Leader Harry Reid and all other members of Congress. Lawmakers should act before a default becomes “imminent” because damage from even a short-term disruption “would last for decades.”

The Treasury estimates the debt limit could be reached as early as March 31, and “most likely” between that date and May 16. The limit stands at $14.29 trillion, leaving about $335 billion of “headroom,” Geithner’s letter said. (more)