Geithner: Failure on debt deal not an option

Treasury Secretary Timothy Geithner on 'Face the Nation," Sunday, July 10, 2011.
CBS/Chris Usher

Treasury Secretary Tim Geithner said today on CBS' "Face the Nation" that Washington leaders must agree on a deal to raise the debt ceiling by the end of next week to avoid serious risks to the economy.

"I do believe that this week, and certainly by the end of next week, we have to have agreement on the outlines of a package," Geithner told host Bob Schieffer. "It has to be clear that the leadership have found a way to solve this and they have a path to get votes for something."

Republicans have insisted on creating a deficit and debt reduction plan as a condition of voting to raise the debt ceiling - the amount of money that the U.S. government is technically allowed to borrow.

President Obama has been seeking a deal of both spending cuts and increased revenue that includes $4 trillion in budget savings over a decade, but House Speaker John Boehner said on Saturday that a mid-size package of reforms that does not include any kind of increase in taxes on anyone is the only politically viable solution.

Geithner said today that the president is still pushing for the largest deal possible.

Mr. Obama and his economic team have repeatedly warned of catastrophic consequences for the U.S. and the global economy if Congress does not increase the $14.3 trillion debt ceiling by August 2.

"You can't wait until August 2," Geithner said. "The credit rating agencies of the world have already made it clear in public, the longer we go into July without a path to resolution, the more risk they are going to put a cloud over our credit rating.

"There's no reason why the leadership in Congress should let that happen," he added. Failure to reach an agreement, he warned, "is not an option."

Some conservatives have suggested that the administration's warning about the Aug. 2 deadline amounts to scare tactics, but Geithner said today, "no responsible leader" would take the risk of defaulting on the nation's loans.

"The risk we face starts to happen in July, but then on August 2 we're left running on fumes," he said. "We'd have no capacity to borrow."