WASHINGTON — The federal government will reach its $16.4 trillion debt limit on Dec. 31 and will begin to suspend issuances of state and local government series securities and take other extraordinary measures to prevent defaulting on U.S. debt, the Treasury Secretary told leaders of Congress Wednesday.
Timothy Geithner said that normally these measures could create about $200 billion or two months of headroom under the debt limit.
"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," Geithner said.
"At this time, 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," he said.
Geithner said the Treasury would provide more guidance "when the policy outlook becomes clearer."
SLGS are specially tailored securities that are issued by state and local governments for advance refunding escrows to make sure they do not violate yield restriction requirements.