NEW YORK ( TheStreet) -- The Obama administration and emboldened Republicans in Congress are locked in a game of economic chicken over raising the national debt ceiling or facing default on U.S. government obligations. Treasury Secretary Timothy Geithner this week found himself in the unenviable position of representing the U.S. government in the role of a delinquent credit card customer asking for a higher credit limit. In place of that line on a credit card account statement that reads "available credit" insert "national debt ceiling." As the Speaker of the House's gavel was handed over from Nancy Pelosi to John Boehner, it wasn't just the joyful tear in Boehner's eye that captured the essence of the moment, but the empowered deficits hawks among the Republican Party who plan to deny the U.S. government's request to raise the debt ceiling -- or, in the least, use every second of their time in the bully pulpit to position President Obama as a wayward steward of the messy balance sheet otherwise known as the U.S. economy.
Treasury Secretary Timothy Geithner
Treasury Secretary Geithner penned a letter to Congress this week that was the epistolary equivalent of an executive branch hat-in-hand plea for more money. It wasn't just a plea, though, but also a sharply worded warning. Geithner chose dire descriptions to portray the potential consequences of the political theater playing out with the new 112th Congress, and in reference to the Republicans testing their muscle by saying they won't vote to raise the national debt ceiling. U.S. Treasury data shows the national debt at $13.95 trillion. The breach of the statutory ceiling of $14.29 trillion set by Congress and signed into law by President Obama in February of last year will occur between March 31 and May 16, according to Treasury Secretary Geithner's letter to Congress. Treasury Secretary Geithner made the case for raising the national debt ceiling, writing to Congress that if the national debt ceiling is not raised, the U.S. government would suddenly be in a position of defaulting on its bonds, and be unable to fund many of the core government programs. Sen. Lindsey Graham (R-S.C.) one of the more compromise-minded Republicans on Capitol Hill, took a calm approach to the issue, recently telling CNN, "Let me tell you what's involved if we don't lift the debt ceiling: financial collapse and calamity throughout the world. That's not lost upon me." If Graham's rhetoric seems hyperbolic, it was matched by Treasury Secretary Geithner's appeal to Congress. The Treasury Secretary noted that never once in the nation's history has Congress failed to raise the debt ceiling when needed. He then rattled off a number of the "catastrophic economic consequences" of the Congressional deficit hawk stubbornness.
A default by the U.S. government would, in effect, cause a long lasting tax on all Americans and the loss of millions of jobs -- and the economic catastrophe would last for decades. Not even to mention that the longtime standing of the U.S. dollar and Treasury bond as the world's financial standard bearers would be given up for good, interest rates would spike, and investors within the U.S. and around the world would likely be spooked.