Treasury Secretary Tim Geithner now estimates that the nation's debt ceiling will be reached no later than that date. In a letter to Senate Majority Leader Harry Reid, Geithner wrote that Congress must act in a matter of weeks to raise the limit or face a fiscal calamity potentially worse than the one from which the nation is recovering.
Geithner noted that the Treasury Department can take "extraordinary measures" to buy time -- about eight extra weeks, maximum -- after the May deadline. But he said once those measures are exhausted the U.S. government would not have enough money to pay its bills. Military salaries, Social Security payments and jobless benefits would cease, he warned, adding that a default on the debt would drive up interest rates, erode home values and cause a new financial crisis.
"For these reasons, default by the United States is unthinkable," Geithner wrote.
But after extracting a last-minute budget deal out of Democrats, in turn averting a government shutdown and marking billions of dollars in spending cuts in their column, Republicans are in the mood for another stand-off on Capitol Hill. From the top down, GOP leaders warn they will not vote to raise the $14.3 trillion debt ceiling unless they see genuine efforts to reduce the deficit.
"There will not be an increase in the debt limit without something really, really big attached to it," House Speaker John Boehner said at a fundraiser Saturday night.
"This is about making the right decisions now," House Majority Leader Eric Cantor, R-Va., told "Fox News Sunday." He touted Rep. Paul Ryan's, R-Wis., budget proposal -- a plan released last week that contains about $6 trillion in spending cuts over the next 10 years -- and suggested Republicans would fight for at least a chunk of that plan as a condition of their support on the debt limit vote.
Ryan, in an interview with NBC's "Meet the Press," said the Republicans' strategy is not to default but compel the government to control spending.
"I think there will be some kind of negotiations, and yes, it probably will go up to some sort of a deadline. The debt ceiling deadline is a moving deadline, it's not a date certain deadline like the government shutdown," Ryan said.
He said the debt ceiling increase, if Republicans are to support it, must come with "real fiscal reforms, real spending cuts, and real spending controls going forward so we can deal with the debt in the future."
White House senior adviser David Plouffe, over the course of several television interviews Sunday, indicated that the White House is willing to put some reforms on the table. President Obama plans to announce a new deficit-reduction plan Wednesday -- a follow-up to a budget proposal earlier in the year which was widely panned by Republicans as doing little to control spending.
Plouffe, though, told "Meet the Press" that voting "no" on the debt ceiling increase could be a "catastrophic failure for the United States economy."
Sen. Charles Schumer, D-N.Y., urged Republicans to take the debt-limit threat off the table.
"It could be a formula for recession or worse," Schumer told CBS' "Face the Nation." "So this is playing with fire."
Though Geithner, in his letter to Reid, said Treasury has a few tricks up its sleeve to forestall the default deadline, he noted the government has "much less flexibility" than it used to because of the sheer size of its deficits.
The secretary said the U.S. government, for instance, can't simply cut spending or raise taxes to avoid hitting the cap. With the public debt increasing at a rate of about $125 billion every month, Geithner said it would take an impossible amount of budgetary rearranging to halt that climb in the near-term.
For reference, the projected fiscal 2011 deficit was about $1.6 trillion. After weeks of wrangling, Congress cut that by just $38.5 billion in the deal reached over the weekend.
"In order to avoid an increase in the debt limit, Congress would need to eliminate annual deficits immediately," Geithner wrote.
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