Geithner renews his warning on the dangers of default

WASHINGTON - Treasury Secretary Timothy Geithner told skeptical House Republican freshmen Thursday that a failure by Congress to raise the nation's borrowing limit would have grim financial and economic consequences.

Geithner came with new evidence of Wall Street's increasing pessimism about a quick resolution to the standoff over government debt. Moody's Investors Service, the debt-rating agency, said it would consider downgrading the U.S. credit rating if there was no progress in negotiations by mid-July.

Geithner called the Moody's report a "warning sign," participants said. House Speaker John Boehner (R., Ohio) said it showed "the White House needs to get serious" about deficits.

The government reached its borrowing limit of about $14.3 trillion May 16. Treasury officials have said they can use maneuvers to continue most government functions until early August, but then would face a default on federal obligations.

Some of the 87 House Republican freshmen, a staunchly conservative and strong-willed group, have questioned Geithner's warnings. They doubt that not lifting the borrowing cap would force a default or lead to unpredictable results in financial markets, as Geithner has argued.

Moody's warning put pressure on Democrats as well as Republicans by calling for a deficit-reduction deal as part of the debt-ceiling talks. Boehner has said Republicans won't vote to raise the limit until President Obama and Senate Democrats agree to about $2 trillion in spending cuts.

House leaders have assured Wall Street that Republicans will eventually raise the limit. Boehner said Wednesday that he believed a deal would be reached within a month.

Rank-and-file Republicans, however, contend Geithner's predictions of economic calamity are an attempt to force GOP leaders to cut a deal.

Sen. Pat Toomey (R., Pa.) has promoted the view that, even without a borrowing increase, the Treasury would have enough money to pay the annual interest on debt, roughly $200 billion. That would be enough to avoid the default, he has said.

Earlier Thursday, House Democrats talked with Obama about cutting the deficit as the White House pushed back against calls from Republicans for Obama to show more leadership and offer more specifics.

"We are at a point now where we don't need new plans," spokesman Jay Carney said, arguing that Obama had already offered one. "We need to find common ground around the shared goal of significant deficit reduction."