Treasury Secretary Timothy Geithner said that Republicans will be to blame if Congress can’t pass a balanced plan to avert the so-called fiscal cliff and insisted that President Obama would not sign a proposal that extends President Bush’s tax cuts for the richest 2 percent of Americans.

Asked, during an appearance on Fox News Sunday, if the country would avert the mix of automatic spending cuts and tax increases that are scheduled to go into effect next year, Geithner insisted that it could, but only if Republicans allowed lower taxes on the wealthiest to expire:

CHRIS WALLACE (HOST): Last question, can you promise that we will not go over the cliff?

GEITHNER: No, I can’t promise that. That is a decision that lies in the hands of the Republicans, that are now opposing increases in tax rates, if they recognize the reality, that we cannot afford to extend the tax rates we have the basis for an agreement that would be good for the American people.

WALLACE: And the President bears no responsibility, it is all up to the Republicans?

GEITHNER: Chris, ask yourself this question, why does it make sense for the country to force tax increases on all Americans, because a small group of Republicans want to extend tax rates for 2% of Americans — why does that make any sense? There is no reason why it should happen, we can’t afford the tax rates, that is like the deep tragic lesson of the last decade, we and not afford them and will not get through it, to the end now, without a recognition of the Republicans to that basic reality and that will be the responsible thing to do and my judgment is, they are going to do it because there is no alternative to that.

The Treasury Secretary also laid out the administration’s proposal for averting the cliff, stressing that the mix of increased revenue and entitlement cuts are grounded in proposals the administration included in the President’s FY 2013 budget and offered during the 2011 budget negotiations.

Alongside the $1.6 trillion in tax increases and $80 billion in investments that Obama is offering, he is also agreeing to $600 billion in “reforms and savings, to our health care and other government programs.” The reductions, Geithner said, are on top of “the trillion dollars in spending cuts we agreed with republicans, last year, on defense and a range of other government programs.”

Republicans have demagogued the proposal. They oppose raising marginal tax rates, but are open to increasing revenue by closing loopholes and deductions, so long as those reforms are tied to unspecified “structural” changes to Medicare and Medicaid.

Early next year, the U.S. is on pace to once again hit its debt ceiling, the statutory borrowing limit imposed by Congress. When the U.S. neared its debt limit in 2011, House Republicans took it hostage, demanding spending cuts and forcing the first credit downgrade in U.S. history due to their intransigence on taxes.

That the U.S. faces periodic standoffs over the debt ceiling is a problem entirely of Congress’ own creation. The debt ceiling didn’t even exist until 1917, and serves little practical purpose. During an interview on Bloomberg Television, Treasury Secretary Tim Geithner acknowledged as much, saying that the U.S. should abolish the debt ceiling entirely:

Treasury Secretary Timothy Geithner said the U.S. “absolutely” should get rid of the debt ceiling as soon as possible.

“It would have been time a long time ago to eliminate it,” Geithner told Bloomberg TV on Friday. “The sooner the better.”

Geithner did not commit to personally doing anything to eliminate the nation’s legal limit on borrowing. When pressed on the issue, Geithner told Bloomberg TV: “This is only something only Congress can solve. Congress put it on itself.”

As the American Prospect explained last year, “experts — including former Office of Budget and Management and Treasury officials, congressional staffers, and CBO employees — have suggested in the past, and are suggesting now, replacing the debt ceiling with debt targets for lawmakers to work under.” Certainly, in its current form, the debt ceiling does nothing but give the minority party a chance to manufacture a crisis every time it needs to be increased.

The Federal Reserve yesterday released transcripts from 2006 (full official transcripts of Fed meetings are released five years after the meetings occur), which shed some light on how badly the Fed misinterpreted the housing bubble. “I really believe that the drop in housing is actually on net going to make liquidity available for other sectors rather than being a drain going forward, and that will also get the growth rate more positive,” said then Fed member Susan Bies. “Housing is a relatively small sector of the economy, and its decline should be self-correcting,” added Janet Yellen, now the Fed’s vice chairman.

Dallas Fed Chairman Richard Fisher said that, “as one CEO told me, the only subject that has been more analyzed than the housing situation is the birth of Brad Pitt’s baby.” Chairman Ben Bernanke, meanwhile, predicted “at worst, an orderly decline in the housing market,” while now Treasury Secretary Tim Geithner (then president of the New York Federal Reserve) said, “we think the fundamentals of the expansion going forward still look good.”

The Fed’s perspective is perhaps best summed up by Gary Stern, then president of the Minneapolis Federal Reserve, in a March 2006 meeting:

I thought I would comment a bit more on two issues in particular—one is housing—where I wonder if the significance of potential developments might not be being exaggerated a bit. I certainly agree that changes in housing prices, up or down, feed into household wealth and through that into consumer spending. I think that’s a perfectly acceptable story. So if housing prices go down or level off, they will have that effect on wealth and potentially on spending.

But there seems to be a view that, in some sense, an exogenous pronounced decline in housing prices is possible, maybe even likely, and that this could be more devastating for the economy. It’s not that I would quibble with that story, but I would wonder about its likelihood because it seems to me more likely that housing is the tail rather than the dog in this. That is, as long as employment continues to go up, incomes continue to go up, and mortgage rates remain relatively moderate, then I would expect that we would avoid severe difficulties in housing except for a few markets that are particularly inflated at this point.

From the transcripts, it becomes clear that Fed officials thought the economy supported the housing market. But it was actually the other way around: the housing sector was supporting the economy. Meanwhile, the nation’s biggest banks had entwined themselves (via the housing market, which they were helping prop up with predatory subprime loans) to such an extent that when housing finally declined, the whole system fell apart.

For months, Republicans have refused to budge when it comes to negotiations over raising the nation’s debt ceiling, rejecting various generous concessions in return for a simple vote to ensure that the country pays its bills. Now, with default only days away, Republicans have dug in, insisting that acceptance of their radical “cut, cap, and balance” plan is the only way forward.

The Obama administration and the Democrats have offered the GOP deal after deal, saying that they are willing to cut everything from Social Security to Medicare in order to secure a debt ceiling increase, even though the debt ceiling is typically raised as a matter of protocol without controversy. But Republicans, sensing that they could wring more concessions from the Democrats and eager to placate their Tea Party base, have refused to say “yes.”

As the Los Angeles Times details, the administration was well aware that negotiating over the debt ceiling could lead to an ugly place. In fact, back in February, Treasury Secretary Tim Geithner explicitly warned against engaging in negotiations over the debt ceiling at all, because “if you let people negotiate over the terms, the risk is you leave people with expectations you can’t meet”:

For months, the administration’s position seemed to be that the debt limit should be raised with no conditions. In Washington-speak, that’s known as a “clean” increase.

In February, Geithner spoke at a House Budget Committee hearing and said, “You know, this is not a popular thing for people to do, and if you let people negotiate over the terms, the risk is you leave people with expectations you can’t meet. And it is just that that suggestion leads us to suggest you should do it clean.”

But two months later, Obama told a reporter that lifting the debt ceiling was “not going to happen without some spending cuts.” Later in the month, White House Chief of Staff William Daley said something similar: “Nobody thinks there will be a clean debt ceiling extension vote. There probably shouldn’t be, without some changes in spending. The budget deficit is a real thing that has to be addressed.”

Rep. Peter Welch (D-VT), who introduced a clean debt ceiling increase, “said he got a phone call from Geithner commending him for pushing for an increase in the debt ceiling not tied to anything else.” According to reports, Geithner’s preferred strategic approach was ultimately rejected by others in the administration because it was deemed to be a course that couldn’t muster the votes. (Ironically, the preferred approach adopted by the administration also wasn’t able to generate support.)

Now, a clean debt ceiling increase seems to be inexplicably off the table, even though the leadership of both parties agree that the debt ceiling needs to go up if the nation is to avert an unprecedented and potentially catastrophic economic mess. Because default truly would be disastrous, and because a negotiated compromise seems increasingly out of reach within the Aug. 2 deadline, a clean vote for an increase would be the responsible course at this late hour.