Collision projected with debt ceiling
Published: Wednesday, Oct. 31, 2012, 7:18 p.m.
WASHINGTON — The Obama administration said on Wednesday that the nation would hit the legal limit on its debt near the year's end, although it can tap emergency measures to stave off a default and keep the government running into early 2013.
As of Monday, the Treasury was $235 billion below the $16.4 trillion statutory ceiling on the amount it can borrow. That gives the government enough money to pay its bills, including interest on its debt and retirement health benefits, until the end of the year, the Treasury said, reiterating a forecast it made in August.
If Congress fails to raise the debt limit, analysts expect the Treasury will run out of options to avoid a default in the latter half of February. However, the forecast could change dramatically depending on how the administration and Congress deal with the huge tax increases and spending cuts due to go into effect at year-end.
After Tuesday's presidential and congressional elections, Washington will have less than two months to find a solution to the so-called fiscal cliff — the $600 billion in tax increases and budget cuts that could fuel a fresh recession.
Treasury officials, briefing reporters on debt sale plans, said it was urgent that Congress act to increase the nation's borrowing authority.
“As we saw last summer, it is important that the debt limit is raised in a timely manner,” Treasury Assistant Secretary Matthew Rutherford said.
A political fight last summer over raising the debt ceiling pushed the United States to the brink of default and prompted Standard and Poor's to downgrade the country's top-tier credit rating. A congressional watchdog agency said the battle also drove up Treasury's borrowing costs.
Deep divisions between Democrats and Republicans over taxes and government spending once again carry the potential for a costly policy clash over budget policy.
A group of Wall Street firms that advises the Treasury on borrowing needs offered a warning that the prospect the nation could run into the fiscal cliff was weighing on the U.S. recovery. Business investment slumped in the third quarter, taking a bite of economic growth.
“A timely and orderly resolution of this uncertainty would contribute meaningfully to an improvement in the economic outlook,” the firms said in a report to Treasury Secretary Timothy Geithner.
The Treasury announced plans to auction a total of $72 billion in 3-, 10- and 30-year debt securities next week to refund maturing debt and raise $8.9 billion in new cash. The department expects to keep its debt sales stable in coming months.
This week, the Treasury cut its borrowing estimates for the final quarter of the year due to higher-than-expected revenues and less government spending.
The Treasury said it still had not made a decision on whether to allow investors to bid on securities that offer negative interest rates.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Starkey: Steelers know when to say goodbye
- Analysis: Kesler remains on Penguins’ radar as Shero looks bring back ‘Big 3’ formula
- Pirates’ big risk with pitch-heavy draft focus might soon pay off
- With so many needs, Steelers can ill afford to miss in draft
- Ex-Colts executive Polian: Approach free agency with caution
- Obama losing close adviser to end 9 years of service
- Penguins GM Shero’s deadline deals: Addition by subtraction
- IUP students have raucous early St. Patrick’s Day celebration
- Greensburg bishop’s time at helm draws to a close
- Exclusive to the Trib: The crisis in Ukraine — America can be deferrential no more
- Fashion essentials: Pittsburgh’s style watchers tell what they can’t live without