December 26, 2012

Geithner: Debt Ceiling Will Be Reached on New Year’s Eve

Treasury Department taking steps to ‘buy’ time

Treasury Secretary Timothy Geithner. (Photo: AP) Treasury Secretary Timothy Geithner. (Photo: AP)

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Let the hangover metaphors begin.

With all eyes focused on the impending fiscal cliff and whether or not it will be avoided, the Treasury Department said Wednesday that the government would hit its $16.394 trillion borrowing limit by Monday. This will set in motion a series of emergency steps “that might buy the government until just February or March before it faces a full-blown debt crisis,” The Wall Street Journal reported on Wednesday.

In a letter addressed to Senate majority leader Harry Reid, D-Nev., Treasury Secretary Timothy Geithner said the Treasury Department will begin taking “certain extraordinary measures authorized by law to temporarily postpone the date that he Unites States would otherwise default on its legal obligations.”

According to Geithner, the extraordinary measures are:

  • Suspending sales of State and Local Government Series Treasury securities;
  • Determining that a “debt issuance suspension period” exists, which permits the redemption of existing, and the suspension of new, investments of the Civil Service Retirement and Disability Fund and the Postal Service Retirees Health Benefit Fund;
  • Suspending reinvestment of the Government Securities Investment Fund and
  • Suspending reinvestment of the Exchange Stabilization Fund.

The measures, all of which have been employed during previous debt limit impasses, have the effect of creating or conserving “headroom beneath the debt limit.”

“These measures are limited and therefore can postpone only briefly the need for an increase in the statutory debt limit,” Geithner concluded. “On average, the public debt of the United States is increasing by approximately $100 billion per month (although there are significant variations from month to month). In total, the extraordinary measures currently available free up approximately $200 billion in headroom under the limit.”

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