Friday, May 20, 2011
U.S. Rep. Barney Frank (D-Newton) says America might have to default on its bills for the first time ever because Democrats and Republicans can’t agree to raise the government’s $14.3 trillion debt ceiling.
“I’m pessimistic about anything reasonable (winning congressional approval) in the near term,” Frank, the ranking Democrat on the House Financial Services Committee, told the New England Council in a Boston speech today. “It may be that we’re going to have to see some failure to raise the debt limit and some temporary hiatus in our ability to pay our bills (for lawmakers to act).”
The U.S. government officially hit its congressionally mandated debt ceiling on Monday when the nation’s red ink reached $14.3 trillion.
Uncle Sam only avoided defaulting on his debts because U.S. Treasury Secretary Timothy Geithner used accounting tricks to keep the government solvent until Aug. 2.
But unless Congress raises the debt ceiling by then, the government will run out of money to pay its bills — including principal and interest on Treasury bonds, which investors have long considered risk-free.
Geithner and others have warned that markets the world over could melt down if America skips payments on its bonds.
But Frank believes that’s exactly what it might take to break the congressional gridlock, which he blames on Tea Party-backed Republicans holding out for government spending cuts.
“It may be that until (a meltdown) happens, we don’t get anywhere,” the Democrat said.
U.S. Rep. Spencer Bauchus, the House financial committee’s GOP chair, did not immediately return a call seeking comment on Frank’s remarks.
U.S. Rep. Barney Frank (D-Newton) says America might have to default on its bills for the first time ever because Democrats and Republicans can’t agree to raise the government’s $14.3 trillion debt ceiling.
“I’m pessimistic about anything reasonable (winning congressional approval) in the near term,” Frank, the ranking Democrat on the House Financial Services Committee, told the New England Council in a Boston speech today. “It may be that we’re going to have to see some failure to raise the debt limit and some temporary hiatus in our ability to pay our bills (for lawmakers to act).”
The U.S. government officially hit its congressionally mandated debt ceiling on Monday when the nation’s red ink reached $14.3 trillion.
Uncle Sam only avoided defaulting on his debts because U.S. Treasury Secretary Timothy Geithner used accounting tricks to keep the government solvent until Aug. 2.
But unless Congress raises the debt ceiling by then, the government will run out of money to pay its bills — including principal and interest on Treasury bonds, which investors have long considered risk-free.
Geithner and others have warned that markets the world over could melt down if America skips payments on its bonds.
But Frank believes that’s exactly what it might take to break the congressional gridlock, which he blames on Tea Party-backed Republicans holding out for government spending cuts.
“It may be that until (a meltdown) happens, we don’t get anywhere,” the Democrat said.
U.S. Rep. Spencer Bauchus, the House financial committee’s GOP chair, did not immediately return a call seeking comment on Frank’s remarks.
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