US ‘not going to default’: Geithner

Tuesday, 12 July 2011 00:00 - - {{hitsCtrl.values.hits}}

WASHINGTON: The United States is “not going to default,” Treasury Secretary Timothy Geithner said, warning Republicans there was “no alternative” to making a budget deal with the White House.

If President Barack Obama and his Republican foes in Congress fail to forge an accord before August 2, the resulting debt default would be catastrophic, he told NBC’s “Meet the Press,” adding: “failure is not an option.”

Geithner said a deal would be reached as both sides realized the United States, struggling to emerge from a damaging recession, cannot afford to lose its borrowing ability and risk having its debt rating downgraded.

“The president is standing tough” but is prepared to make sacrifices on entitlements like Medicare, help for the elderly, and Medicaid, help for the poor, if Republicans agree to tax reforms to share the burden, he said.

“They should not walk away now,” Geithner said hours after Republican leader John Boehner warned he was abandoning efforts to reach a a larger, comprehensive debt reduction deal.

“We need both sides to come together,” he said, pressing Boehner not to scale back discussions and keep focusing on a deal to save trillions of dollars over the next decade -- what he said could be a “great moment.”

Republicans have been demanding that the Democrats agree to huge spending cuts to rein in the ballooning deficit.

The talks are part of a final major push to reach a deal to raise the congressionally determined limit on US borrowing, now set at $14.29 trillion, in the face of a budget deficit expected to hit $1.6 trillion this year.

The US hit the ceiling on May 16, but has since used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating without impact on government obligations.

But by August 2, the government will have to begin withholding payments -- to bond holders, civil servants, retirees or government contractors -- and the White House has urged a deal by July 22 to allow time for Congress to pass it.