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December 26, 2012

Treasury: Government will hit debt limit Monday

The government will reach the $16.4 trillion debt limit Monday, Treasury Secretary Timothy Geithner told congressional leaders Wednesday.

As a result, he said, the department "will shortly begin taking certain extraordinary measures authorized by law to temporarily postpone the date that the United States would otherwise default on its legal obligations."

He spelled out those measures in an appedix to the letter. It was unclear what impact this news would have on negotiations to avert the fiscal cliff; Bush-era tax cuts expire at the end of the year, and automatic spending cuts take effect Jan. 2 unless alternatives are adopted.

Geithner explained that the special measures "can create approximately $200 billion in headroom under the debt limit.  Under normal circumstances, that amount of headroom would last approximately two months."

But, he said, "given the significant uncertainty that now exists with regard to unresolved tax and spending policies for 2013, it is not possible to predict the effective duration of these measures.  At this time, the extent to which the upcoming tax filing season will be delayed as a result of these unresolved policy questions is also uncertain. 

"If left unresolved, the expiring tax provisions and automatic spending cuts, as well as the attendant delays in filing of tax returns, would have the effect of adding some additional time to the duration of the extraordinary measures.  Treasury will provide more guidance regarding the expected duration of these measures when the policy outlook becomes clearer."

To read the letter: http://www.treasury.gov/connect/blog/Pages/Secretary-Geithner-Sends-Debt-Limit-Letter-to-Congress-12-26.aspx

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