One week to go before the nation reaches the August 2nd deadline set by the Treasury Department to raise the federal borrowing limit or face default.
Sen. Johanns says that a resolution of the issue doesn’t seem any closer now than a week ago. Johanns worries it might even be further away with the House and Senate in Washington working on two competing plans.
“I’m concerned,” Johanns tells Nebraska Radio Network. “I am of that school of thought that says, ‘Look, we must honor our obligations.’ That’s just the way I was raised. You pay your bills.”
Washington returns to the issue after back-to-back appearances on nationwide television by President Obama and House Speaker John Boehner.
Obama, in his 15 address, called for an end to a “partisan three-ring circus”. Obama criticized the House Republicans “cuts only approach” to reducing the federal budget deficit, a key point in the talks to increase the borrowing limit so the federal government can meet all its obligations on August 3rd. The debt limit stands at $14.3 trillion.
Obama accused Republicans of holding the economy captive.
“This is no way to run the greatest country on earth. It’s a dangerous game that we’ve never played before and we can’t afford to play it now,” Obama told the nation.
Speaker John Boehner (R-Ohio) replied moments later, criticizing Obama for creating a “crisis atmosphere”. Boehner stated the United States cannot default on its debt obligations that too many jobs and savings of too many Americans are at stake.
“What we told the president in January was this: the American people will not accept an increase in the debt limit without significant spending cuts and reforms,” Boehner stated.
Boehner stated the House approved a measure that would have raised the debt ceiling. He said when the president flatly rejected the “Cut, Cap and Balance” bill, he made a sincere effort to work with the president to implement its principles. Boehner claimed the president’s demands changed.
A new sticking point to the talks has arisen. Boehner plans to bring a two-step plan to raise the debt limit before the House. It would cut $3 trillion in spending. Senate Majority Leader Harry Reid (D-Nev.) has offered a similar measure. The difference, though, is significant. Boehner calls for a second debt-limit vote next year. Reid doesn’t want to revisit the issue until after the 2012 elections.
Johanns tells us he has real worries about default. He suggests Congress should come to an agreement on how to raise the borrowing limit, and then map out a plan to reduce the debt. Johanns says that while some have dismissed the effect missing the August 2nd deadline will have, one thing is certain, some people will not get paid.
“I’m not going to sugar-coat that. I’m not going to make it look better than it is. That’s a bad situation and people will be hurt by that,” according to Johanns.
Treasury Secretary Timothy Geithner has stated that without more authority to borrow by August 2nd, the government will not be able to pay its bills. Credit-rating firms have warned that they might downgrade America’s credit rating, which could push up interest rates and rattle world markets which have always considered the United States a safe haven for investments.