Could US default on its Debt? Government Borrows 30 Billion a Week!

With the U.S. borrowing about $30 billion a week, some economists say the Treasury will need an increase of as much as $1.5 trillion if it wants to avoid another request before the 2010 midterm elections. The U.S. could default on its debt if Congress doesn't raise the debt ceiling, but it is a remote scenario.

While requests to raise the debt ceiling are routine and Congress typically agrees, they can turn into protracted battles. Treasury officials are trying to play offense, telling lawmakers that the recovery is too fragile to risk raising questions about whether the U.S. will meet its obligations, these people said. The requests often turn into opportunities for lawmakers to attach other, often controversial provisions, which can delay action.

Mr. Geithner's request comes at a politically sensitive time as concerns mount over the nation's record debt, ballooning budget deficit and reliance on foreign investors.

"In this environment, both [political parties] know that they can't have a serious question of whether Treasury would miss a debt-service payment," said Lou Crandall, a senior economist with Wrightson ICAP, a Wall Street fixed-income research firm.

Some Republicans say they won't vote for an increase. They view the coming debate as a chance to shift responsibility for federal deficits onto congressional Democrats at a time when voters are increasingly fretful about federal borrowing and spending. Voting to raise the ceiling will likely pose a dilemma for more-conservative Democrats, and especially those up for re-election next year.
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