* Conservatives do not believe August default date
* Tea Party Republicans say sell assets instead
* Skepticism raises stakes in debt limit debate
By Tim Reid and Rachelle Younglai
WASHINGTON, May 17 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 Aug. 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
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 Aug. 2.
The Treasury says it can use "extraordinary measures" such
as dipping into government pension funds to fend off default
Many conservative Republicans in the House of
Representatives, especially those affiliated with the
small-government Tea Party movement, say that Geithner and the
White House are trying to panic them into raising the debt
They also contend that the Treasury has other options to
continue meeting the country's obligations, such as selling
assets including gold reserves and government land.
"There is no certain day," said congressman James Lankford,
a member of the fiscally conservative Republican Study
Committee. "It's a moving target. Even if Aug. 2 is passed,
Treasury has the tools in its back pocket to keep us from
Lankford added: "Treasury has done a good job of trying to
increase the panic, rather than giving us solutions."
Dennis Ross, a House Republican and a member of the Tea
Party caucus, told Reuters: "I don't think Treasury has been up
front with us. I am not convinced the sky will fall in on
Ross added: "I'm not an economist, but I have maintained a
household. The federal government owns 70 per cent of Utah, for
example. There are federal buildings. If you need cash, let's
Karl Rove, the former chief political adviser to President
George W. Bush, told Reuters: "Geithner's date predictions have
been too precise, too often, and accompanied by too many dire
Treasury officials stand by the Aug. 2 deadline, and point
out that predicting default dates is complicated because of the
shifting nature of revenues and expenditures. A Treasury
spokesman had no further comment on Wednesday.
Geithner has sent several letters to Congress explaining
why the U.S. Treasury's forecasts have changed. He shifted the
latest deadline to Aug. 2 because of higher-than-expected tax
revenues, he said.
Most economists and financial analysts agree with
Geithner's warning of a financial crisis if the debt limit is
not raised. If that occurs, the fear is that investors, worried
about the creditworthiness of the United States, will stop
buying U.S. Treasury bonds, which will drive up interest rates
and plunge the economy back into recession.
(Editing by Caren Bohan and David Lawder)