Government borrowing will hit the debt ceiling on Monday, Treasury Secretary Tim Geithner said in a letter to Congress Wednesday.
As a result, the Treasury Department will soon start using what it calls “extraordinary measures” to prevent government borrowing from exceeding the legal limit.
Such measures include suspending the reinvestment of federal workers’ retirement account contributions in short-term government bonds.
On Monday, debt subject to the limit was just $95 billion below the $16.394 trillion debt ceiling.
All told, the extraordinary measures can create about $200 billion of headroom under the limit — normally about two months worth of borrowing.
But it’s unclear how much time the extraordinary measures can buy now because there are so many unanswered questions about tax and spending policies, Geithner said, referring to the lack of any resolution of the fiscal cliff.
“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 wrote.
After the extraordinary measures run out, Treasury won’t be able to pay all the country’s bills in full and on time. At that point, the United States will run the very real risk that it could default on some of its obligations.
Geithner has predicted for months that the country would hit the debt ceiling by the end of December.
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