US reaches debt limit: What comes next?
US government has reached the debt limit set by Congress, Treasury's Tim Geithner said Monday. Treasury has ways to keep paying the nation's bills until August. All eyes are now on Congress.
Total US government debt reached the $14.29 trillion limit set by Congress, forcing the Treasury to take extraordinary measures to keep paying the nation's bills, Treasury Secretary Tim Geithner said Monday.Skip to next paragraph
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The event didn't catch the Treasury or Congress by surprise: Mr. Geithner has warned for months that Treasury borrowing was nearing the cap. But it does guarantee that wrangling will intensify in the weeks and months ahead over the terms under which Congress will raise the limit to allow more borrowing.
The challenge is that, with rising national debt a big worry both for voters and financial markets, it's hard for Congress to agree on a path forward. Many Republicans argue that steep curbs on federal spending must be part of any legislation to raise the debt ceiling.
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Geithner declared a "debt issuance suspension period" for the Civil Service Retirement and Disability Fund, a move that allows the Treasury to gain some headroom by redeeming Treasury securities held by the retirement fund, and to stop issuing new Treasury securities to the fund as investments for the time being. Similarly, he suspended reinvestment of Treasury securities held in the so-called G-fund, a money-market fund for federal government employees.
The moves amount to temporary gimmicks, since eventually the Treasury will have to play catch-up in funding those programs. But the tactics will allow federal operations to continue as usual until early August, the Treasury estimates. That amounts to an implied deadline for Congress to raise the limit, most finance experts say.
"I want to again encourage Congress to move as quickly as possible," Geithner said in a public appearance Friday, "so that all Americans will remain confident that the United States will meet all of its obligations – not just our interest payments but also our commitments to our seniors."
Is hitting the debt limit a bad thing?
The answers differ.
Many in Congress have viewed the limit, which is raised periodically over the years, as a tool for bringing America's debt problems into public focus. Hitting the limit provides a moment when, under the light of TV news crews, elected officials ponder the consequences of annual budget deficits and perhaps enact fiscal reforms.
The high-stakes debt-ceiling debate is one reason Vice President Joe Biden has been meeting recently with congressional leaders to seek common ground on fiscal policy.