Treasury says debt limit will be hit by late 2012
WASHINGTON (AP) — U.S. Treasury officials said Wednesday that they still expect the government will hit the current debt borrowing limit at the end of this year. But they said they can employ "extraordinary" measures that have been used in the past to keep the government functioning until sometime early next year.
Treasury Assistant Secretary Matthew Rutherford said that Treasury would employ the same types of procedures it has used previously to keep borrowing under the current debt limit of $16.39 trillion until Congress votes to increase the debt ceiling. The nation's debt currently stands $16.16 trillion.
The United States has never failed to meet its debt obligations although the last battle over raising the debt limit in August 2011 went right to the last minute before a compromise was reached between the Obama administration and Congress.
"We continue to expect that these extraordinary measures would provide sufficient headroom under the debt limit to allow the government to continue to meet its obligations until early in 2013," Rutherford said.
The measures to stay under the debt limit include temporarily removing investments from government employee pension funds to clear room for other borrowing. Treasury officials have not been more specific about the date they will reach the limit of their maneuvering room, but private economists have estimated that the government could continue its borrowing operations under the current limit into early March.
The debate over raising the debt limit is just one of the major budget issues facing Congress. Lawmakers and the administration will also need to reach agreement on a budget reduction plan to avert tax increases and across-the-board spending cuts from taking effect in January. Economists have warned that if this so-called fiscal cliff is not avoided, the adverse effects on the economy could push the country back into recession.
Rutherford's comments on the borrowing limit came as Treasury announced the details of its regular quarterly refunding auctions.
Treasury said at the auctions next week it would sell $32 billion in three-year notes, $24 billion in 10-year notes and $16 billion in 30-year bonds.
The debt auctions will be part of an effort to raise $288 billion during the October-December quarter. That compares to $264 billion in net borrowing that Treasury did during the July-September quarter. Treasury says it expects to borrow $342 billion during the January-March quarter of next year.
These sizable levels of borrowing are being required because the government is running record deficits. For the 2012 budget year, the deficit totaled $1.09 trillion, the fourth consecutive year that the deficit has been over $1 trillion.