Geithner: Raise debt or ‘lights out’

Treasury Secretary Timothy Geithner on Thursday warned skeptical Republican freshmen it would be “lights out” for the economy if Congress fails to raise the debt ceiling.

Geithner trekked to Capitol Hill on the same day that Moody’s Investors Services warned that the nation’s perfect credit rating could be at risk if lawmakers do not make progress on a debt deal.

{mosads}Leaders of the freshman class struck a diplomatic tone after the session, but there was little evidence that Geithner’s argument won anyone over.

“Everything that we got in there from him is a step in the right direction,” said Rep. Austin Scott (Ga.), the president of the GOP freshman class.

Others were more blunt.

Rep. Joe Walsh (R-Ill.) said in a tweet that he was “disgusted and discouraged” by what he heard from the Treasury chief.

Some Republicans said they were frustrated because Geithner did not offer up any compromises for solving the nation’s fiscal crisis, other than acknowledging broadly that entitlements need to be reformed.

“I think to some degree the mood was, or the question Republicans were asking themselves is: Why are we here?” said Rep. Mo Brooks (R-Ala.). “[Geithner] said taxes were something that needed to be raised. Now he is talking about the taxes on the job creators — he used the word ‘wealthy.’”

“I don’t think they get it,” added Rep. Jeff Landry (R-La.). “They want to talk about revenue, about raising taxes. The problem with that is that the American public has no place for that.”

The freshman members pressed Geithner to provide to them Treasury’s contingency plans should Congress fail to raise the debt ceiling by Aug. 2. Many are skeptical the government would actually face “catastrophe,” in Geithner’s words, if the borrowing limit isn’t raised by that date.

Geithner refused to divulge any backup plans Treasury might have, and remained firm that Congress has no choice but to increase the limit.

“It is his view that we need to raise the debt ceiling — he believed that it would be a very, very bad thing if we didn’t raise the debt ceiling, but he wouldn’t give us anything beyond that,” freshman Rep. Mike Pompeo (R-Kan.) told The Hill after the nearly 45-minute session.

Rep. Allen West (R-Fla.) left the meeting early in frustration.

“It was more regurgitated talking points and sound bites from yesterday,” West said, referring to the GOP Caucus meeting with President Obama. “Once again it’s a show thing. All of this: Bring everybody over to the White House, speak to the freshmen. This is just the photo-op to say, ‘look we are reaching out.’ It’s not going anywhere.”

Geithner said after the meeting he is hopeful that a solution to the impasse can be found.

“I am confident two things will happen this summer: we will get an agreement to solve our long-term fiscal problems and we will raise the debt ceiling,” he said.

“Most of this discussion was, what can we do together to solve our long-term fiscal problems?” Geithner said.

Earlier this week, the House soundly rejected a “clean” extension of the debt ceiling that did not include any fiscal reforms. Republicans are demanding the administration back major spending cuts as part of a deal on the debt ceiling.

GOP lawmakers who attended the meeting said Geithner appeared overly optimistic that Congress will vote to raise the debt ceiling by his Aug. 2 deadline.

Geithner “overestimates the probability of that happening,” Pompeo said. 

“I think the House showed earlier this week that we are in no way interested in voting for a debt-ceiling increase without some very specific conditions,” GOP freshman Rep. Alan Nunnelee (R-Miss.) told The Hill.

Though Scott invited Geithner to speak to the 87 Republican freshman members, the Treasury secretary requested that the nine Democratic new members attend as well, according to an aide familiar with the situation.

Geithner spoke to a packed room, and structured the question-answer portion in such a way that a Republican and then a Democratic lawmaker would have a chance to ask questions.

One GOP member complained that it was hard to “have continuity” in the meeting, in terms of pressing Geithner on a Plan B because a Democrat would not follow up with the GOP’s line of questioning.

Democratic Rep. Hansen Clarke (Mich.) told reporters, “[Geithner]  said not increasing the limit would be catastrophic to our economy, totally unlike the government shutdown — we don’t want to go up to the point of brinksmanship because that could wreak havoc in the capital markets.” 

According to Clarke, Geithner “brushed over” a striking statement issued earlier in the day by Moody’s Investors Service warning that if lawmakers cannot make progress on a deal to raise the debt limit within the next few weeks, the nation’s credit rating could be endangered.

Moody’s said that if progress on a deal does not become evident by the middle of July, it would probably put the nation’s rating on review for a downgrade.

House Speaker John Boehner (R-Ohio) issued a statement Thursday that noted the Moody’s announcement confirms what Republicans have advocated since taking the majority in January: any increase in the debt ceiling must include massive cuts in spending.

Rep. Paul Gosar (Ariz.) and other Republicans said Obama needs to put forward a fiscal plan that could be “scored” by the nonpartisan Congressional Budget Office for cost and savings.

Rep. James Lankford (R-Okla.) said that even though Geithner used the term “lights out” to describe default, he did not specify that would happen on Aug. 3.

“No one knows the date on that,” he said.

Erik Wasson contributed to this story.