June 8, 2011, 4:13 p.m. EDT
U.S. debt talks to resume after new rating warning
Failure to lift debt limit would endanger U.S. debt rating: Fitch
WASHINGTON (MarketWatch) — Talks led by Vice President Joe Biden aimed at striking a deal to head off a default by the U.S. government this summer are set to resume Thursday after a fresh warning about the consequences of failure to raise the $14.3 trillion debt ceiling.
On Wednesday, Fitch Ratings said it would put U.S. debt on watch for downgrade in early August if Congress doesn’t lift the borrowing limit. The Obama administration says the debt ceiling needs to be raised by Aug. 2.
Biden has been holding regular meetings with a group of bipartisan lawmakers including House Majority Leader Eric Cantor, a Virginia Republican, and Senate Minority Whip Jon Kyl, an Arizona Republican.
On Wednesday, White House press secretary Jay Carney said that the Fitch warning underscores the administration’s case about raising the limit.
“I think it makes clear the case that we’ve been making, that there is no alternative here to raising the debt ceiling. This is not about additional spending. This is about honoring the obligations that the United States government has made. And the consequences of not raising the debt ceiling, as some of these rating agencies have suggested, would be severe,” Carney told reporters.
Treasury Secretary Timothy Geithner has warned that the U.S. won’t be able to pay interest or principal on Treasury bonds, among other payments, if Congress doesn’t raise the borrowing limit.
Republicans say that they want spending cuts to exceed an increase in the debt limit. An increase of more than $2 trillion would be enough to last through the 2012 elections. But Kyl said earlier this week that Republicans would consider a shorter-term increase if they couldn’t get the amount of cuts they want.
Also on Wednesday, an adviser to the People’s Bank of China said the United States is “playing with fire” by even considering a brief technical default. China is the biggest foreign holder of U.S. Treasury securities, with $1.1 trillion as of March. Read data about foreign holders of Treasury securities.
“I think there is a risk that the U.S. debt default may happen. The result will be very serious and I really hope that they would stop playing with fire,” said the adviser, Li Daokui, according to a Reuters report.
Treasury prices and the U.S. dollar held onto gains on Wednesday after the Federal Reserve’s Beige Book came out. Yields on two-year notes headed toward an all-time low.Read Bond Report.
Meanwhile, a separate group of lawmakers is also continuing to try to agree on a long-term deficit-reduction plan. On Wednesday, Sens. Mark Warner, a Virginia Democrat, and Saxby Chambliss, a Georgia Republican, suggested that they are aiming to cut as much as $4.7 trillion from budget deficits over the next decade.
That group, dubbed the “Gang of Six,” is down by one member after Oklahoma Republican Sen. Tom Coburn abruptly dropped out over a dispute about Medicare spending. Chambliss and Warner said they hope he rejoins the group of senators and Chambliss said he’s dining with Coburn Wednesday night.
“I ask him back at least once a day,” Chambliss told a small group of reporters after speaking with Warner at an event in Washington.
No comments:
Post a Comment