Treasury Department pushes back estimate of when the U.S. will hit debt ceiling
The debt-ceiling D-Day -- the date when the United States reaches its statutory limit -- won't take place until at least April 5, according to new figures released Wednesday by the Treasury Department.
Treasury Secretary Timothy F. Geithner estimated last month that the ceiling would be reached between March 31 and May 16 if it were not increased. But because of an upward revision in tax revenues and a projection that government trust funds will need to issue less government debt, the department revised those dates to between April 5 and May 31.
The federal government is fast approaching its authorized debt ceiling of $14.29 trillion as the White House braces for a showdown with the Republican-controlled House over raising the level. Congress normally raises the ceiling as a matter of course -- it's happened 75 times since 1962 -- to prevent the chaos that would follow if the government could no longer borrow money.
But facing record-high budget deficits, many congressional Republicans don't want to raise the ceiling. House Speaker John Boehner (R-Ohio) has said any increase must be paired with meaningful spending cuts.
Geithner wrote to lawmakers on Jan. 6, warning of "catastrophic economic consequences" if the debt ceiling is not raised, which would trigger default on government bonds. White House Chief of Staff William Daley reiterated those warnings Wednesday, telling a Bloomberg breakfast gathering that it would be "very dangerous" if Congress failed to raise the ceiling.
If the government hits the debt ceiling, it would not be able to pay interest to those holding Treasury bonds and would default on that debt, "causing catastrophic damage to the economy, potentially more harmful than the effects of the financial crisis of 2008 and 2009," Geithner wrote.
Sen. Pat Toomey (R-Pa.) said he had a solution to the default worries.
On Wednesday he introduced legislation called the Full Faith and Credit Act, which would give priority to paying principal and interest on government debt "over all other obligations incurred by the government of the United States" should the ceiling be reached. The bill, which has 18 co-sponsors in the Senate, would allow Congress to freeze the debt ceiling without risking default, he said.
“We need to take the possibility of default off the table so everyone can sit down at the table and have a serious and honest conversation about cutting spending and instituting structural reforms to put our country’s finances on a sustainable path,” said Toomey, former head of the fiscally conservative Club for Growth. "Failing to raise the debt ceiling is not a desirable situation and would be disruptive, but the worst thing we can do is simply continue the irresponsible deficit spending that jeopardizes our economic future