U.S. reaches debt ceiling, begins suspending some investments to delay impact
The U.S. officially hit its $14.29-trillion debt ceiling Monday, forcing steps such as the suspension of some investments to delay for several weeks a potential government default on its obligations, Treasury Secretary Timothy F. Geithner said.
As the White House and lawmakers continue to seek a deal to increase the legal limit on U.S. debt, Geithner sent a letter to all members of Congress on Monday, notifying them of two measures he is taking immediately. Those measures delay any major practical impact until Aug. 2.
"Each of these actions has been taken in the past by my predecessors during previous debt limit
impasses," Geithner told lawmakers. But he urged them to take "timely action to
increase the debt limit in order to protect the full faith and credit of the United States and avoid
catastrophic economic consequences for citizens."
Geithner said he started a "debt issuance suspension period" for the Civil Service Retirement and Disability Fund, allowing the Treasury Department to start cashing in some of the securities held by the fund. He also suspended the daily reinvestment of Treasury securities held by the Government Securities Investment Fund of the Federal Employees’ Retirement System Thrift Savings Plan.
Both funds will be made whole if the debt limit is increased, and the moves will not affect federal retirees and employees, he said.
The moves were expected as Geithner tries to buy as much time as possible before the U.S. would be unable to pay what it owes on government securities and other debt. Geithner outlined the measures in a letter earlier this month.
Congress has voted to raise the legal limit on federal borrowing 75 times since 1962, although this is the most serious impasse since the 1990s. The nation's huge budget deficits have led most Republicans, along with some Democrats, to demand major spending restraints before they agree to raise the debt ceiling again.
"But at some point, it's clear to me that we have to increase the debt ceiling. And as we do, we're going to do it in a way that addresses America's long-term fiscal challenges," Boehner said on CBS' "Face the Nation."
"Listen, I'm ready to cut the deal today," he continued. "You know, we don't have to wait until the eleventh hour. But I am not going to walk away from this moment. We have ... a window of opportunity to act because, if we don't act, the market is going to act for us. Our creditors are going to act for us."
President Obama and other administration officials have warned Congress not to tempt fiscal disaster by using the debt ceiling as a bargaining chip in budget negotiations. In a letter to Sen. Michael Bennet (D-Colo.) Friday, Geithner said failure to raise the limit could trigger another recession and "would inflict catastrophic, far-reaching damage on our nation's economy, significantly reducing growth and increasing unemployment."
-- Jim Puzzanghera
Photo: Treasury Secretary Timothy F. Geithner. Credit: EPA