Tim Geithner is full of shit and he knows it. This nonsense that the Government will default on exisiting debt unless the debt limit is raised is ridiculous. Nothing of the sort is going to happen. What WILL happen is that by around August 2 or so, after interest is paid on existing debt, there will be a shortfal for other spending AND no additional borrowing will be able to take place. In short, there are plenty of Federal revenues now and in the future to pay interest on EXISTING debt.
In their negotiations, Boehner and the Republicans are taking the sensible position that there be budget cuts for every dollar of increase in the debt limit.
What Obama wants, and will NEVER get , is a $ Two TRILLION increase in the debt limit now so he can safely get by the 2012 election without having to make any hard ( read politically unpopular ; anathema to his base ) budget choices.
Down the road there IS a real default possibiility looming. Without budget cuts and spending restraint, the percentage of the budget going to debt service will grow larger and larger to the point where there won't be money for much of anything else AND like Greece we won't be able to borrow any more. Greece has become the Blanche Dubois of Europe and is dependent on the "kindness of strangers " i.e. the EU. The Greek 'bailout" is effectively charity and not really a loan that anyone seriously expects it to pay back. In return the EU has effectively taken over the Greek budget taking it away from the Greek government. At some point one's "bankers" get to do that. Would anyone like a Chinese committee to replace our Congress's Senate Budget and House Ways and Means Committees ?
As Melonie and others have pointed out in other threads, the Obama solution is a pathetic farce. Even if we confiscated 100% of all the income made by everyone making more than $250,000 per year it would amount to less than half of the current budget. Even if we gutted the defense budget it wouldn't put more than a minor dent in the current deficit or overall debt.



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