The U.S. government will hit the $16.4 trillion federal debt limit on Monday and turn to “extraordinary measures” to continue borrowing, the Treasury Department said Wednesday, beginning a countdown until Congress either passes legislation to allow for more borrowing or the government defaults on its debt.
Treasury Secretary Timothy F. Geithner said in a letter to senior lawmakers that the Treasury would begin to undertake “extraordinary measures” in order to forestall default. Geithner said the measures could create about $200 billion in additional funding available to the government – giving Congress two months before it must raise the debt limit.
To begin conserving money, Treasury will suspend a program on Friday that helps states and localities manage their borrowing.
In subsequent weeks, Treasury will start to tap the federal worker pension fund for additional financial resources. (The pension fund will be made whole once the debt limit impasse is resolved.)
Geithner added that the resolution of the fiscal cliff could affect these estimates. In particular, he wrote, “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.”
President Obama has insisted that the debt limit be taken off the table in negotiations between Democrats and Republicans over the fiscal cliff. But Republicans have insisted that the debt limit provides an important point of leverage to force spending cuts.