Treasury Secretary Timothy Geithner said Tuesday that if Republicans insist on passage of their budget plan as a condition for approving an increase in the nation's borrowing limit, they will be responsible for the consequences.
Speaking to a New York audience, Geithner said that Republicans would bear responsibility for the first debt default in the nation's history if they insist they will not vote for an increase in the $14.3 billion borrowing limit unless they win approval of a House Republican budget plan.
"If Republicans try to impose that plan on this country as a condition for raising the debt limit, then they will own the responsibility for the first default in our history, with devastating consequences," Geithner said in a speech to the Harvard Club of New York.
Geithner noted that the country reached the current borrowing limit of $14.29 trillion on Monday. He said he has begun deploying a series of bookkeeping maneuvers to avoid a debt default but that he will run out of maneuvering room around Aug. 2.
"As I have said before, Congress must meet its responsibility to protect the nation's full faith and credit by increasing the debt limit," Geithner said.
He said while the borrowing costs on the national debt have remained low, that could change quickly if financial markets begin to doubt America's ability to deal with its financial difficulties.
He said the cost of debt default, something that has never occurred in the country's history, would be as devastating as the financial crisis that hit in 2008.
"As we saw in the fall of 2008, when confidence turns, it can turn with brutal force and with a momentum that is very difficult and costly to arrest," Geithner said. "That is a threat we should pre-empt."
Geithner called on lawmakers to work on a credible deficit-cutting plan that could be accepted by both Republicans and Democrats.
House Speaker John Boehner said again on Monday that Republicans will not support an increase in the debt limit "without serious budget reforms and significant spending cuts."
Republicans have ruled out any tax increases, including any plans to end tax cuts for high earners enacted in 2001 and 2003.
The Treasury Department confirmed that the debt ceiling was reached on Monday with the debt now totaling $14.293 trillion, $25 million under the current ceiling of $14.294 trillion.
Treasury will maintain that level over the next 11 weeks through a series of maneuvers that began Monday when Geithner informed Congress he had halted investments in two pension plans for federal employees.
Treasury will begin reducing the debt holdings in those accounts over the next few weeks to make room for its regular auctions of debt.