Associated Press

If you have a car, you're probably aware of that light on your dashboard that lets you know when you're nearly out of gas. It's not a time to panic, of course, but rather it's a time to realize action is needed -- the car isn't about to stop running, but you're running low and need to do something routine before there's a real problem.

Tim Geithner's letter to Congress today is a bit like that light on the dash.

Treasury Secretary Tim Geithner announced Wednesday that the U.S. Government will hit its borrowing limit on December 31 if Congress doesn't act.

The announcement adds pressure on lawmakers to resolve many of the nation's fiscal challenges by the end of the year or go over the so-called "fiscal cliff," a set of spending cuts and tax increases that will fall into place automatically if Democrats and Republicans can't reach agreement.

Some of you may see the news and think, "Wait, don't we have months until we reach the ceiling? Does this mean Congress has to act by Monday? Should I stock up on canned goods and ammunition?"

Relax. Take a deep breath. This isn't a big deal -- at least, not quite yet.

The letter is largely a formality, and it's not unexpected. The nation will technically reach its borrowing limit on Monday, but as Geithner's letter (pdf) goes on to explain, the Treasury will then begin "extraordinary measures" -- which, regrettably, are increasingly ordinary -- providing policymakers "approximately $200 billion in headroom."

Once these efforts are exhausted, the nation will have reached its actual debt limit, which will require congressional action. How much time does $200 billion in "headroom" get us? Probably about two months.

And then we'll be in trouble.

On a related note, it didn't get a lot of attention last week, but President Obama was asked at a press briefing whether he's prepared to go along with the Republican hostage strategy, negotiating in order to get a debt-ceiling increase. Obama didn't equivocate; here's his complete answer:

"No. And I've been very clear about this. This is the United States of America, the greatest country on Earth, the world's economic superpower. And the idea that we lurch from crisis to crisis, and every six months, or every nine months, that we threaten not to pay our bills on stuff we've already bought, and default, and ruin the full faith and credit of the United States of America -- that's not how you run a great country.

"So I've put forward a very clear principle: I will not negotiate around the debt ceiling. We're not going to play the same game that we saw happen in 2011 -- which was hugely destructive; hurt our economy; provided more uncertainty to the business community than anything else that happened.

"And I'm not alone in this. If you go to Wall Street, including talking to a whole bunch of folks who spent a lot of money trying to beat me, they would say it would be disastrous for us to use the debt ceiling as a cudgel to try to win political points on Capitol Hill.

"So we're not going to do that -- which is why I think that part of what I hope over the next couple of days we see is a recognition that there is a way to go ahead and get what it is that you've been fighting for. These guys have been fighting for spending cuts. They can get some very meaningful spending cuts. This would amount to $2 trillion -- $2 trillion -- in spending cuts over the last couple of years. And in exchange, they're getting a little over a trillion dollars in revenue. And that meets the pledge that I made during the campaign, which was $2 to $2.50 of spending cuts for every revenue increase. And that's an approach that I think most Americans think is appropriate.

"But I will not negotiate around the debt ceiling. We're not going to do that again."

This contention will be tested; whether the president is prepared to stick to this remains to be seen.

Associated Press

Treasury Secretary Tim Geithner appeared on several Sunday shows yesterday, and for the first time, made explicitly clear that higher rates on income above $250,000 is a precondition to any fiscal agreement.

"There's not going to be an agreement without rates going up," Geithner said, reinforcing the fact that the White House sees no reason to give up on this central tenet of President Obama's platform, which enjoys broad public support.

House Speaker John Boehner (R-Ohio), of course, has a very different approach in mind. Here's what he had to say on "Fox News Sunday."

"Listen, what is this difference where the money comes from? We put $800 billion worth of revenue, which is what he's asking for, out of eliminating the top two tax rates. [...]

"We've put the revenue on the table. And, again a dozen different ways to get there without raising tax rates."

And this, in a nutshell, is why talks aren't going anywhere. The White House has a plan on the table, which includes $1.6 trillion in new revenue, relying largely on higher rates on income above $250,000. Congressional Republicans, by their own admission, have no plan, and a vague promise about being able to find $800 billion in new revenue without raising rates, by closing loopholes and ending some deductions.

For those who take arithmetic seriously, the GOP approach borders on laughable. Indeed, Republicans refuse to put pen to paper, responding to requests by effectively saying they have a secret plan to collect $800 billion in new revenue. How? Where? So far, Boehner & Co. simply won't to say. How reassuring.

Also note, as far as the White House is concerned, GOP leaders won't offer a detailed proposal because they can't -- there's simply no credible way to get $800 billion in new revenue through deductions and loopholes, without forcing the middle class to feel the pinch, which both sides say they will not do.

The political world seems to be marveling at the lack of progress in fiscal talks with deadlines looming, but until Republicans do their homework and present a counteroffer to the White House plan, nothing can happen.

Associated Press

Have you ever heard the theatrical saying, "If there's a gun on the stage, it has to go off"? I think about the adage often when pondering the debt ceiling.

Between 1939 and 2010, Congress raised the debt limit 89 times. It was an easy, routine bit of legislative paperwork -- the issue came up 89 times, and in 89 instances, Congress passed a clean bill. Even during the Bush presidency, Republicans raised the debt ceiling, without strings or preconditions, seven times. The current GOP leadership in Washington -- John Boehner, Mitch McConnell, et all -- has voted to raise the debt limit 19 times. Bush's former budget director said this "ought to be treated as the housekeeping matter it is."

For 71 years, in other words, the gun on the stage sat untouched by both parties.

In 2011, congressional Republicans, for the first time in American history, decided to pick up the gun, load it, and wave it around. Never before had an entire major-party caucus threatened the full faith and credit of the United States, and the man-made crisis that ensued was brutal, both for our economy, our political health, and our standing on the global stage.

Eventually, Democrats accepted concessions, and convinced Republicans to put down the gun. But early next year, it will time for another debt-ceiling vote, and GOP leaders have already said they're once again prepared to do significant damage to the country, on purpose, unless new demands are met. With that in mind, Treasury Secretary Tim Geithner believes it's time to take the gun off the stage permanently.

Treasury Secretary Timothy Geithner said the U.S. "absolutely" should get rid of the debt ceiling as soon as possible.

"It would have been time a long time ago to eliminate it," Geithner told Bloomberg TV on Friday. "The sooner the better." [...]

"Only once, last summer, did people decide to use it to threaten default on the American credit for the first time in history as a tool for political advantage," he continued. "And that's not a tenable strategy for the country."

Quite right. Having a debate over whether the United States will deliberately default on its debts -- not to go through with it, just having the debate itself -- is incredibly damaging. But knowing that the gun on the stage may go off eventually is itself dangerous, and in need of a resolution.

Matt Miller had a good column on this the other day.

The president knows he can't let the precedent established last year become the new normal in budget talks. He knows the debt ceiling is a weird relic that no other country (save Denmark, sort of) possesses. In most nations, the act of the legislature passing a budget simultaneously authorizes its treasury to borrow whatever debt that budget contains. That's only common sense.

If Ben Bernanke can press the limits of legal authority to save the economy, and Obama himself can press these limits to approve a "hit list" for drones, then defanging the debt ceiling should be child's play by comparison. [...]

Time to remove the fiscal appendix, Mr. President. For sane governance to live, the debt limit must die.

For the record, the nation is on track to next hit the debt ceiling in February. If the White House doesn't make this part of the ongoing fiscal talks, it's making a mistake.

Associated Press

House Speaker John Boehner (R-Ohio) yesterday said he would do in 2013 exactly what he did in 2011: use the debt ceiling to hold the nation hostage. As Boehner sees it, Democrats have to give in, or he'll trash the full faith and credit of the United States and crash the economy on purpose.

And why did Boehner declare his intentions in mid-May? Because the Speaker is trying to shape upcoming tax-policy negotiations, applying leverage to get what he wants. The problem, as Treasury Secretary Tim Geithner noted yesterday, is that Boehner's calendar doesn't quite work.

At the end of this year, an enormous fight is looming over taxes and revenue, when all of the Bush-era tax cuts are set to expire, just as major spending cuts from the debt-ceiling agreement are set to begin. This doesn't directly relate to the debt-ceiling fight, but Boehner wants it to -- yesterday was partly about sending a signal to the White House. The Speaker was effectively saying, "I'm holding a gun to the nation's head; if you don't want me to pull the trigger, don't push for any tax increases."

But Geithner spoke at the same fiscal summit, and said something interesting.

"[O]n the current estimates ... we're likely to hit the debt limit sometime before the end of the year, but Congress has given the executive branch a set of tools that buy [administration officials] some time. And those tools will probably take us into the early part of 2013, thus separating somewhat the timing of the expiry of the tax cuts and the sequester with the ultimate need for Congress to act on the debt limit. You know, they should do it as soon as they can, but that's the basic sequence in this context."

That may sound a little clunky, but in everyday terms, the Treasury Secretary was explaining that policymakers will be dealing with expiring tax cuts and triggered spending cuts in December, but won't be dealing with the debt ceiling until January and February.

Boehner wants to tie the debt limit to the December discussion, but the administration has no reason to play along. Indeed, at this point, we don't even know who'll be the President or the House Speaker the next time the ceiling needs to be raised.

To be sure, the variables may change, and as Brian Beutler noted, if federal receipts slow, the deadline for the debt-ceiling vote may come much sooner.

But for now, Boehner has a strategy that he probably won't be able to execute.

Treasury Department Flickr

Yesterday the Treasury Department went all out in celebrating Treasury Secretary Tim Geithner's 50th birthday. They even included a special birthday coffee lid! It's not quite the $35,800 per plate dinner President Obama had for his birthday, but hey, it's something.