(CNSNews.com) – Treasury Secretary Timothy Geithner said the U.S. debt limit of $16.394 trillion will be met on New Year’s Eve, in a letter to Congress on Wednesday.
“I am writing to inform you that the statutory debt limit will be reached on December 31, 2012, and to notify you that the Treasury 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,” Geithner said in the letter addressed to Senate Majority Leader Harry Reid (D-Nev.)
Geithner said “extraordinary measures” taken by the Treasury Department could create approximately $200 billion in headroom under the debt limit.
“Under normal circumstances, that amount of headroom would last approximately two months,” he said. “However, 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,” Geithner continued, “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,” Geithner said.
The news of the federal government closing in on its debt ceiling adds another dimension to the so-called fiscal cliff that will be met at the end of the year, unless Congress and the president reach an agreement in the coming days.
The fiscal cliff refers to the expiration of the Bush tax rates and the start of automatic budget cuts (sequestration) on Jan. 2, unless Congress and the White House take action. President Barack Obama is adamant that taxes must increase for all Americans – small businesses and dual income households – that make $400,000 or more.
The Republican-led House of Representatives also supports raising taxes but starting for those earning $1 million or more per year, as well as ending some deductions and loopholes.
The debt limit or debt ceiling is the amount of money that the federal government can legally borrow. To borrow beyond the $16.3 trillion it has already spent, Congress must pass legislation to lift the debt ceiling and the president must sign it into law.
-- 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.
Congress last approved an increase in the debt ceiling in August 2011, raising it to $16.394 trillion. The Treasury Department had warned that the U.S. was approaching the debt limit by the end of the year in October. Geithner has proposed eliminating the debt ceiling restrictions entirely.
As of close of business Dec. 24, the total debt held by the public was $16.338 trillion.