May 26 (Bloomberg) -- A group of Republican senators sent a letter to Treasury Secretary Timothy Geithner questioning his warning of a possible default if Congress doesn’t raise the U.S. debt ceiling by an August deadline.
The 17 Republicans, including Jim DeMint of South Carolina and Pat Toomey of Pennsylvania, accused Geithner of ignoring some methods he could use to forestall a default of government obligations to bondholders, including cutting federal programs.
“We believe it is irresponsible and harmful for you to sow the seeds of doubt in the market regarding the full faith and credit of the United States and ask that you set the record straight -- that you will use all available Treasury funds necessary to prevent default while Congress addresses the looming debt crisis,” the senators wrote in a letter dated May 23 and released by DeMint today.
Geithner told Congress in a May 2 letter that lawmakers need to act by Aug. 2, almost a month later than he previously estimated. Delaying action “risks a loss of confidence” and a U.S. default would have a “catastrophic economic effect,” he wrote.
“The suggestion by some in Congress that instead of meeting their responsibilities, the United States should for some indefinite period stop paying nearly half of its bills, is both misguided and deeply irresponsible,” Treasury spokeswoman Colleen Murray said in an e-mailed statement today.
Republicans in both chambers are demanding large spending cuts in exchange for an increase in the $14.3 trillion debt limit. Vice President Joe Biden is leading bipartisan talks with six lawmakers geared toward drafting an accord. The group met in the Capitol today.
Some of the Republicans who signed the letter to Geithner have previously said he is trying to stampede Congress into approving the boost by warning of a crisis they reject as exaggerated.
In the letter, they referred to the debt-ceiling deadline as a “budget enforcement mechanism.”
It’s time to “address the looming fiscal crisis, cut spending, reform entitlements, implement spending caps, and pass a balanced budget constitutional amendment before considering any increase in the federal debt ceiling,” they wrote. “These are the contours of the debate before the American people this spring and summer.”
Other Republican senators who signed the letter include Mike Lee of Utah, Ron Johnson of Wisconsin, Tom Coburn of Oklahoma, Mike Johanns of Nebraska and Orrin Hatch of Utah.
Federal Deposit Insurance Corp. Chairman Sheila Bair told a House Financial Services Committee panel today that “a technical default on U.S. government obligations would prove to be calamitous.” Bair was appointed by former President George W. Bush and her term expires in July.
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