U.S. Treasury Secretary Timothy Geithner was scheduled to deliver his annual testimony before the House Financial Services Committee this morning, but for the second time this year the hearing was postponed. According to a spokeswoman for the committee, Geithner cited a scheduling conflict due to ongoing national debt ceiling talks, and a new date has not yet been set. But whenever Geithner does appear before the committee, here are some vital questions that he should be asked. First, if political brinkmanship over the debt ceiling is so unnerving to debt markets, why are yields (the rate of return required to attract investors) on Treasury bonds still so low? Back in April, Geithner went on the Sunday morning talk show circuit crying alarms that the debt ceiling had to be increased without delay. Yet two months later, there still is no agreement on the debt ceiling, and yields on 10-year Treasury notes are even lower now than they were then, dipping below 3 percent this week. If investors were seriously worried about the prospect of default because of the political disagreements in Washington, wouldn’t those yields be much higher?
Second, when will President Obama offer a detailed proposal to reduce the nation’s long-term debt? In February, Obama released his 2012 budget proposal, but that document did nothing to address the nation’s debt crisis. In April, after Rep. Paul Ryan, R-Wis., made public his extensively detailed plan to rein in entitlements spending, Obama gave a speech outlining in general terms his thoughts on the need to reduce the debt. But he still hasn’t spelled out how he wants to do it. Even so, the Obama administration is pressuring Congress to raise the debt limit above $14.3 trillion to accommodate new spending.
