It is in the best interest of the United States to maintain relations with Venezuela, but that country may face diplomatic "consequences" if it refuses to accept Larry Palmer as the U.S. ambassador there, a State Department spokesman said Wednesday.

Spokesman Mark Toner said he's prohibited from discussing visa issues under U.S. law, but suggested Venezuela's ambassador to the U.S. Bernardo Alvarez could become the casualty in a diplomatic feud with Venezuela.

Toner was commenting after Venezuelan President Hugo Chavez on Tuesday dared the U.S. government to expel Alvarez in reaction to Venezuela's rejection of Larry Palmer as the White House's choice for ambassador in Caracas.

Chavez reiterated that he will not allow Palmer to be ambassador, and said "if the government is going to expel our ambassador there, let them do it! ... If they're going to cut diplomatic relations, let them do it!"

"We believe it's in our national interest to have an ambassador in Caracas so we can express our views and engage with the government of Venezuela," Toner said, noting that tensions between the two countries demands that they stay in contact. 

The United States does have a second in command at the embassy, but Toner said an ambassador is an ambassador and head of the diplomatic mission in host countries.

Toner was grilled by reporters Wednesday and, while he would not say what the consequence could be, he did say there could be consequences. Toner didn't deny that throwing Alvarez out is an option but said his plans right now are the decision of the Venezuelan government.  

The State Department has previously said it stands behind its nomination of Palmer, who is awaiting Senate confirmation. Palmer angered Chavez by suggesting during the confirmation process that morale is low in Venezuela's military and that he is concerned Colombian rebels are finding refuge in Venezuela.

State Department spokesman P.J. Crowley also said last week that Venezuela's decision not to accept Palmer -- after initially giving its approval -- will have consequences on relations with Venezuela, and that the U.S. government will evaluate what to do. 

The State Department has also been strongly critical of decree powers granted to Chavez by his congressional allies this month, a maneuver Crowley described as one more way for the leftist president to "justify autocratic powers."

"Now the U.S. government is threatening us that they're going to take reprisals. Well, let them do whatever they want, but that man will not come," Chavez said in a televised speech.

There was no immediate reaction from the U.S. Embassy in Caracas, which has been without an ambassador since Patrick Duddy finished his assignment and left in July.

Chavez, whose economy relies heavily on oil sales to the United States, has accused Palmer of dishonoring the Venezuelan government by expressing concerns on several sensitive subjects, including 2008 accusations by the U.S. Treasury Department that three members of Chavez's inner circle helped Colombian rebels by supplying arms and aiding drug-trafficking operations.

"For an ambassador to come, he has to respect this homeland," Chavez said.

Chavez's latest actions in pushing through controversial laws are contributing to the diplomatic tensions.

The National Assembly on Dec. 17 granted Chavez broad powers to enact laws by decree for a year and a half. Opponents have condemned that and a package of other laws approved by Chavez's congressional allies, saying the legislative offensive amounts to an authoritarian power grab and will give Chavez new abilities to crack down on dissent.

The measures have been hurriedly passed before a new legislature takes office Jan. 5 with enough opposition lawmakers to prevent passage of some types of major laws.

Chavez said Tuesday that he used his decree powers to establish 10 military districts -- many of them in three western states bordering Colombia, two of which are led by opposition governors. Chavez did not elaborate on how the districts will be administered, but they could be under the equivalent of martial law.

Marcel Granier, a media executive whose channel RCTV was pushed off the airwaves by the government in 2007, condemned the latest decree saying Chavez "is trying to put a military authority above the civil one."

Chavez has defended his decree powers, saying he is trying to quickly provide funding for housing construction after floods and landslides that drove thousands from their homes, and also plans measures to accelerate his government's socialist-oriented efforts.

Other laws passed by Chavez's congressional allies this month increase state control of universities and block foreign funding to any nongovernment organizations that defend "political rights" -- a change critics say will hobble some human rights groups.

The National Assembly also passed laws that make it easier for the government to revoke TV or radio licenses, speed up the process if Chavez decides to nationalize more banks, and allow for the suspension of any lawmakers who defect from a party during their term.

One of the most controversial laws extends broadcast-type regulations to the Internet -- barring messages that "disrespect public authorities," ''incite or promote hatred" or crimes, or that could create "anxiety in the citizenry or alter public order."

"The president is only interested in maintaining power, but he doesn't take his responsibilities seriously," said Julio Borges, a newly elected opposition lawmaker. Borges told reporters that the opposition will propose a law aimed at getting guns off the streets because the government has failed to address gun violence.

The Associated Press contributed to this report.