* Businesses nervous about higher borrowing costs
* Wall St, manufacturers support Geithner’s request
By Rachelle Younglai and Tim Reid
WASHINGTON, April 29 (Reuters) - Big U.S. manufacturers, fearful of higher borrowing costs, are lining up with Wall Street banks to pressure a divided Congress to raise its $14.3 trillion cap on how much Washington can borrow.
Just two weeks are left until the U.S. government will have to start taking emergency measures so that it can continue paying its bills after May 16.
As part of an intense lobbying effort on Capitol Hill, a broad coalition of business and trade groups plan to send a letter to lawmakers when they return to Washington next week, warning of dire consequences if America’s borrowing limit is not increased.
Failure to raise the borrowing cap could trigger a “massive” spike in interest rates that would threaten America’s slow economic recovery, according to a draft of the letter obtained by Reuters.
The Obama administration has expressed confidence that Congress will agree to increase the level of U.S. borrowing, but fiscally conservative Republican lawmakers, and some Democrats, say they won’t back raising the debt ceiling unless it is accompanied by a detailed and concrete plan to cut government spending.
That has raised the specter of the United States defaulting on its debt and scared Corporate America into action.
“We feel the U.S. needs to meet its financial obligations,” said Dorothy Coleman, vice president of tax and domestic policy at the National Association of Manufacturers, one of three business groups spearheading the effort on Capitol Hill.
“If we bump against our debt limit, that will cause a real increase in interest rates, which would affect manufacturers directly,” she said.
Lobby and trade groups for powerful companies such as Caterpillar (CAT.N), Goldman Sachs (GS.N) and Bank of America (BAC.N) are feverishly trying to mobilize support from every part of the business community.
Together, they want to present their case to lawmakers who have threatened not to allow the United States to borrow more without serious reforms to government spending.
The letter business groups plan to send to Capitol Hill also warns that international confidence in the U.S dollar could plunge if lawmakers fail to allow the government to borrow more to meet its obligations.
“Raising the statutory debt limit is critical to ensuring global investors’ confidence in the creditworthiness of the Unites States,” the draft letter states.
Business groups and some Wall Street banks have also been intensely lobbying the 85 first-term Republicans elected in November. Many of the new lawmakers are aligned with the fiscally conservative and anti-government Tea Party movement, which opposes raising the debt limit.
If the debt ceiling is reached by May 16 as the U.S. Treasury has forecast, investors may become nervous and sell U.S. government bonds. That would drive down bond prices and force the United States to offer higher interest rates to make its debt more attractive to borrowers.
Treasury Secretary Timothy Geithner has warned Congress that the Treasury’s extraordinary measures will stave off default until July 8, when the country will no longer be able to meet its obligations, including paying interest on its outstanding debt.
Companies are worried that the cost of borrowing will increase and wipe out what little progress they have made after the 2007-09 financial crisis and ensuing recession.
The manufacturing group along with the U.S. Chamber of Commerce, and the Financial Services Forum, a financial policy group that includes CEOs of the biggest banks, are trying to garner support from up to 50 various business groups.
It’s an about-face for many business groups, who traditionally side with Republican causes of lower taxes and small governments, and funneled billions of dollars into Republican coffers when the Obama administration and Democrats passed the sweeping Wall Street reforms in 2010. (Editing by Ross Colvin and Anthony Boadle)