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Wednesday, May 18, 2011

Skepticism grows on Geithner's debt limit deadline



(Reuters) - U.S. Treasury Secretary Timothy Geithner is facing growing criticism for his changing predictions on when the country might face a debt default, shifts that have led some Republicans to discount his dire warnings that the debt limit must be raised soon.

Since January, Geithner has changed his forecast of when the U.S. would hit its borrowing cap, and the final deadline for raising the debt limit, at least four times -- fueling a belief among rank-and-file Republicans that his latest August 2 deadline is artificial and can be ignored.

Some Democrats are increasingly worried that the changing calendar has been counter-productive, complicating efforts to get the $14.3 trillion borrowing cap raised because many conservative Republicans do not believe the country will start to default for many months.

"You can only cry wolf so many times," a former economic official in the Bill Clinton White House told Reuters. "If you are jumping from May to July to August, you can see people thinking that maybe you can jump from August to October.

"If people believe you can stretch this to October -- and the truth is, we really can't -- we're in big trouble."

Geithner first began warning in January of "catastrophic" consequences if the debt limit is not raised by Congress, saying then that the borrowing cap could be hit as early as March 31.

That prediction soon changed to April 5, but it was not until Monday -- May 16 -- that the ceiling was officially reached as the latest government bond sales were settled.

In early April, Geithner also said the drop-dead date for a debt limit rise, when the U.S. would begin to default on its obligations, was July 8. This month he changed that to August 2.

The Treasury says it can use "extraordinary measures" such as dipping into government pension funds to fend off default until August.

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