Rarely In Doubt
In the past, votes to increase the debt ceiling were mostly routine and their outcomes rarely in doubt. This year, with the nation's debt soaring and the economy in the midst of a fragile economic recovery with joblessness still high, Obama and his administration say a failure to raise the borrowing limit would be devastating.
In a May 13 letter, Geithner said a failure to increase the debt limit would "force the United States to default on its obligations" and sketched out dire consequences, from a sharp drop in U.S. household wealth to the potential for another financial crisis that could threaten the global economy as well as millions of American jobs.
"This would be an unprecedented event in American history," Geithner wrote in response to an inquiry by Democratic Senator Michael Bennet of Colorado. "A default would inflict catastrophic, far-reaching damage on our nation's economy, significantly reducing growth, and increasing unemployment."
Bond Market's View
Concern about the debt-ceiling vote has not been reflected in bond trading.
U.S. 10-year note yields touched the lowest since December on May 13 on speculation that inflation may have peaked after the Labor Department reported the consumer price index rose 0.4% in April, matching economists' forecast. The U.S. sold $72 billion in notes and bonds last week and will auction $11 billion in Treasury Inflation Protected Securities this week.
Most Republicans and a few Democrats have said they won't vote to boost the nation's borrowing limit without action to rein in deficits and reduce long-term debt. House Speaker John Boehner, an Ohio Republican, said the boost must be coupled with spending cuts that outweigh the borrowing increase.
'Worst Message'
"Probably the worst message we could send is if it was clean and we hadn't accomplished anything on debt," Snowe said.
There are lawmakers on both extremes. A letter from 114 House Democrats to their leaders demanded the debt-limit vote be "clean." On the other side, a number of House and Senate Republicans say there's no need to raise the limit at all.