WASHINGTON (Reuters) - A Republican plan to prioritize debt repayments if the United States breaches its $14.3 trillion borrowing limit is “unworkable”, Treasury Secretary Timothy Geithner said on Thursday.
Republicans in the Senate and House have introduced legislation that would mandate the Treasury to pay interest on its debt if borrowing surpassed the debt ceiling.
But Geithner said the bill would be quite harmful if enacted and reiterated the need for Congress to increase the legal amount the country is allowed to borrow.
“The Treasury Department has always held the view... that the only way to prevent default and protect America’s creditworthiness is through the enactment of a timely increase in the debt limit,” Geithner said.
The Treasury Department estimates that the limit will be reached between April 5 and May 31. It has already taken steps to avoid a breach and is reducing the amount of money it holds in a special account at the Federal Reserve.
As of January 31, the total public U.S. debt stood at $14.079 trillion, or $215 billion below the limit.
Geithner made his remarks in a letter addressed to freshman Senator Patrick Toomey, one of the lawmakers who sponsored the bill in the Senate.
Reporting by Glenn Somerville, Rachelle Younglai; Editing by Andrew Hay