Colin Barr

Following the money in banking, economics, and Washington

Washington's debt ceiling terrorists

April 27, 2011: 2:06 PM ET

Not everyone is persuaded that cooler heads will prevail before Washington hoists itself by its debt ceiling petard.

When he hasn't been calling the whole mess ridiculous, Treasury Secretary Tim Geithner has been saying lately he is confident Republicans will increase the debt ceiling. That is, as you know, legislative artifact that gives the leading lights in Congress a richly deserved chance to pretend they don't approve of the deficit spending they have spent their entire careers stumping for. The government will bump up against it next month.

Heavily made up terrorist

Geithner's stance offers a bit of hope that maybe we have years, rather than weeks, before the lunatics in Washington finally blow us all sky high. But Paul O'Neill, the former Bush administration Treasury secretary who run out on a rail after failing to quaff the tax-cut Kool Aid, said Wednesday that he isn't at all sure the United States will avoid a collision with bond market reality this summer.

Republicans who insist on linking a rise in the federal debt ceiling to immediate budget cuts "are our version of Al-Qaeda terrorists," O'Neill said on Bloomberg television. "They're really putting our whole society at risk by threatening to round up 50% of the members of the Congress, who are loony, who would put our credit at risk."

The comments come as our deficit-addicted nation prepares to break through the current ceiling, set at $14.3 trillion, on May 16. Geithner said last month that a bit of budgetary gamesmanship could keep the government running another two months or so, but no longer.

O'Neill saved his harshest words for the congressional Republicans led, if that's the word, by Ohio's John Boehner -- whose insistence on linking the debt ceiling increase to budget cuts he described as dangerous.

But he was not exactly doing cartwheels over Geithner's performance either.

Let's just say he is one guy who saw both pluses and minuses when Robert Rubin pulled his various tricks to keep the government open during the previous shutdown era of 1995-1996. Those sorts of antics are going to have to stop, O'Neill said, if we want to have any chance of coming to grips with our actual fiscal condition, which is let's say not all that good.

I believe that administrations for the last 30 years have made a mistake, in this sense. There is now a set of practices that are employed that are effectively accounting engineering, to extend reaching the debt ceiling. … How do we get from May to July by doing financial accounting tricks? I think it helps the Congress to avoid being responsible. I think that's a really bad idea.

But then, there is no shortage of those nowadays, particularly not in Washington.

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About This Author
Colin Barr
Colin Barr
Senior Writer, Fortune

Colin Barr has covered finance for Fortune.com since November 2007. Previously he was a writer and editor for TheStreet.com, winning a 2006 Society of American Business Editors and Writers award for "The Five Dumbest Things on Wall Street," and for Dow Jones Newswires. He is a 1991 graduate of Penn State and lives in Port Washington, N.Y., with his wife Meena Bose and their two kids.

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