WASHINGTON — Treasury Secretary Timothy Geithner sent a letter to congressional leaders late Monday warning them that the U.S. government could hit the $16.4 trillion federal debt ceiling as early as mid-February and urging them to increase the limit as soon as possible to avoid a disaster.
Geithner said it is impossible to provide a precise date because “we are entering the tax season, when the amounts and timing of tax payments are refunds are unpredictable.”
“For this reason, Congress should act as early as possible to extend normal borrowing authority in order to avoid the risk of default and any interruption in payments,” he said
The Treasury secretary noted the federal government makes about 80 million separate payments per month, including for Social Security, Medicare, Medicaid, national security needs, military salaries and retirement, federal employee salaries and retirement, law enforcement, and disaster relief.
“If Congress does not act to extend borrowing authority, all of these payments would be at risk,” Geithner told lawmakers. “This would impose severe economic hardship on millions of individuals and businesses across the country.”
He stressed that “extending borrowing authority does not increase government spending; it simply allows the Treasury to pay for expenditures Congress has previously approved.”
A U. S. default on its debt, even if temporary “would be terribly damaging” and would increase U.S. borrowing costs, damage economic growth and add to budget deficits, Geithner said.
While some lawmakers have suggested President Obama could take action to extend the debt limit, Geithner said, “Protecting the full faith and credit of the United States is the responsibility of Congress because only Congress can extend the nation’s borrowing authority. No Congress has ever failed to meet that responsibility.”
Several Republicans have suggested Congress should let the U.S. default.
Geithner quoted the late President Ronald Reagan warning against such inaction. Reagan complained in a speech to the nation in 1987, “Congress consistently brings us to the edge of default before facing its responsibility. This brinkmanship threatens the holders of government bonds and those who rely on Social Security and veterans benefits.”
Geithner urged Congress “to meet its responsibility to the country by extending normal borrowing authority well before the risk of default becomes imminent.”
The Treasury secretary had warned the lawmakers in December that the debt limit would be reached by the end of the year. But the Treasury began taking a series of extraordinary measures, including suspending sales of State and Local Government Series securities (SLGS) used by muni issuers, to delay that date.
Those measures will be exhausted between mid-February and early March, Geithner said in his letter Monday.
