Get ready for Boehner as good cop as Tea Party threatens to take down government without spending cuts; Treasury runs out of borrowing power in April or May 2011

Boehner is out there saying that not increasing the government's debt ceiling is not even, "on the table", which of course means that some in Washington are already considering this possibility. 

One thing is certain, we don't have much time.  We will run out of room to borrow in April or May and then, we will default on either our loans, entitlements or start issuing IOUs like they do in California.  By the way in California, their IOUs are only worth 85 cents on the dollar.  I think it would be interesting to see what US Treasury IOUs are worth.  With the US debt level, they have to be worth less than par. 

Some tea party folks are threatening to not extend without meaningful cuts.  I agree with this philosophy, but not with this strategy.  While you can't use the past to predict the future, a similar tactic was tried by Newt Gingrich when they shut down the government after the Republicans retook the house in 1994.

But, instead, they should use the Tea Party threat as a tool.  Get ready for Boehner as good cop.  Via Reuters:

With the Treasury Department rapidly coming closer to bumping up against its statutory borrowing limit of $14.3 trillion, some of Boehner's fellow Republicans in Congress have suggested that no further borrowing should be authorized until deep cuts are made in federal spending.

Boehner, interviewed on "Fox News Sunday," was asked about the impact of a government default if the limit on its borrowing authority was not raised in a timely way.

"That would be a financial disaster not only for our country, but for the worldwide economy," Boehner responded. He added, "Remember, the American people on Election Day said we want to cut spending and we want to create jobs. You can't create jobs if you default on the federal debt."

Treasury Secretary Timothy Geithner has estimated that unless Congress acts to increase the debt ceiling, his agency will run out of borrowing authority sometime between March 31 and May 16.

At that point, the government could default on some loans.

Last week, the Treasury Department initiated the first in what is expected to be several stop-gap moves to delay hitting that $14.3 trillion limit on credit.

Even as he pressed for cutting government spending, Boehner said of the notion of Republicans forcing a government default: "I don't think it's a question that is even on the table."

Banks don't want California IOUs


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