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Saturday, May 28, 2011

Republican Senators Nullifies Geithner's Debt Default Warning

At least 17 Republican Senators have contested Treasury Secretary Geithner's debt default warning on Thursday in a letter to explaining that the federal government can still meet its financial obligations even though the debt limit is not raised.

Jim DeMint, banking panel member, reiterated that the United States can still pay the debt interest to creditors as long as the administration agree to cut spending. He asserted that Geithner's warning caused unhealthy effect among investors as well as foreign businessmen.

Pennsylvania Senator Pat Toomey clarified that the United States Treasury may encounter disruptions, but the nation’s economy would not collapse, contrary to what Geithner has stated.

The Republicans expressed disapproval in raising the legal debt limit. The group argued that any raise in the $14.3 trillion cap should be coupled with real spending cuts from the administration. In the meantime, the US Treasury can focus on paying debt interest and reduce US expenses.

The Treasury Department responded that the government's failure to pay huge debts can cause drastic effect on economy, and may compel creditors to raise borrowing costs significantly. In turn, investors may lose confidence in the US' capacity to handle its financial responsibilities. The debt limit was already reached on May 16, and is expected to drain Social Security retirement fund.

The US Treasury has been using SS pension funds to pay the nation's bills. Soon, it will run out and may compel the government to declare default. This means the United States can no longer pay Social Security benefits to retirees and meet its credit obligations. Such economic situation may push United States into deep recession and affect the international market.

Whether the Republicans or the Treasury Department officials are right, it is clear that the United States has to come up with solid measures to resolve its fiscal problems. Should Congress and the administration fail to agree on economic solution before August this year, a default is bound to happen.

If you are one of the retirees who are hoping for financial assistance, better search for alternative income as the government is by itself helpless. The hope may be bleak for a 60-year-old, but it is even darker for a struggling government.

For more information, you may consult with a Social Security lawyer in Los Angeles. You may dial our toll free number at 1-866-772-2889, or email us at for free case analysis.