With GOP inviting a debt crisis, Geithner starts juggling

WITH GOP INVITING A DEBT CRISIS, GEITHNER STARTS JUGGLING…. At first blush, yesterday’s news on the debt ceiling appeared encouraging. After all, when a countdown to a catastrophe is pushed off, and a deadline is delayed, everyone gets a little breathing room. A temporary reprieve is still a reprieve.

That said, word from the Treasury Department offered more clouds than silver linings.

A greater-than-expected increase in tax revenue has extended by about a month, until early August, the federal government’s ability to pay its bills without an increase in the debt ceiling, the Treasury Department said Monday.

The new estimate creates a significant grace period for Congress to consider an increase in the maximum amount that the government can borrow, a step that House Republicans say they will not take without an agreement to curb spending.

Federal borrowing is still likely to hit the legal limit on May 16, the Treasury said, so this week it will begin to take emergency steps to buy additional time under the cap. Those steps, plus the increase in tax receipts, which have reduced the need for borrowing, will delay a crisis by about a month — to August from July.

What we’re looking at is basically two separate-but-related deadlines. The first is hitting the debt limit itself, and that deadline hasn’t changed. We’ve known for a while that this was projected to happen in about two weeks, and the clock will, in fact, run out on May 16.

The second deadline is the more important one. It’s been assumed that we’d reach the debt limit on time without congressional action, at which point the Treasury Department starts juggling the books, taking “extraordinary measures” to avoid a catastrophe. We thought this deadline was coming in July, but Geithner projected yesterday that policymakers now have an extra month to do the right thing.

And what do the new emergency steps include? The Treasury will first suspend a program “under which it borrows money from state and local governments to help those governments meet legal obligations to invest in tax-exempt bonds.” (Treasury has done this before, whenever debt-ceiling problems have popped up.) In two weeks, additional measures will kick in.

Geithner added yesterday that members of Congress should not use the debt limit increase as a “bargaining chip to advance partisan policy agendas,” which echoes Fed Chairman Ben Bernanke’s advice, but which Republicans will ignore.

Indeed, despite the potential for devastation, GOP leaders continue to explore new ways to play reckless and dangerous games. Avoiding a catastrophe couldn’t be easier, but congressional Republicans, at least for now, don’t seem to care.

The new drop-dead deadline? August 2.