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U.S. debt ceiling debate must be settled now, Geithner says

By the CNN Wire Staff
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Geithner talks averting default crisis
  • The debate over raising the U.S. debt ceiling has gone "a little too far," Geithner says
  • The treasury secretary says any deal must remove the threat of a U.S. default
  • Congress must increase the U.S. borrowing limit by August 2 or face default

Washington (CNN) -- Congress must reach a deal now to raise the federal debt ceiling through 2012 because "you don't want politics messing around with America's faith and credit," Treasury Secretary Tim Geithner told CNN on Sunday.

"The most important thing is that we remove this threat of default from the country for the next 18 months," Geithner said in an interview with CNN's "State of the Union" program. "You want to take this out of politics."

Geithner acknowledged the decision on increasing how much money the government can borrow in order to avoid defaulting on its obligations already has been politicized, saying, "They have taken this a little too far, frankly."

If Congress fails to raise the $14.3 trillion debt limit by August 2, Americans could face rising interest rates, a declining dollar and increasingly jittery financial markets, among other problems.

Debt talks special meeting
Obama: there is still time
Boehner: No one wants to default

President Barack Obama continues to negotiate with House Speaker John Boehner and other congressional leaders, Geithner said. Boehner announced Friday he was withdrawing from negotiations with Obama and instead would seek a deal with congressional Democrats, but Geithner said the president was involved in talks throughout Saturday.

According to congressional sources from both parties, a possible deal under discussion would involve two stages. The first would include about $1 trillion in spending cuts accompanied by a similar increase in the debt ceiling. Then a bipartisan congressional committee would recommend reforms to the tax code and entitlement programs intended to bring more deficit reduction, with an accompanying increase in the debt ceiling.

Geithner acknowledged the discussions focused on a possible two-step process. However, he maintained the administration's opposition to requiring two votes by Congress to increase the debt ceiling -- one now and another in the first half of 2012, when the election season will be in full bloom.

When asked if Obama will follow through on his threat to veto such a deal, Geithner said Democrats in Congress would prevent such a measure from getting passed.

"It's not going to make it that far ... so that's not a viable option," Geithner said.

"There's nothing wrong with doing this in stages," Geithner added, but he reiterated that a deal must remove the "threat of default" from the country by settling the debt ceiling issue now in order to reassure the American people, the business community and the world.