Sat, Dec 01, 2012 - Page 15 News List

US won’t reach limit before February: CBO

BREATHING SPACE:While lawmakers argue over how to address the problems of the ‘fiscal cliff,’ the Treasury still has some ‘extraordinary’ measures available to it

Bloomberg

The US Treasury Department is estimated to have enough authority to continue borrowing through “at least mid-February” next year, the Congressional Budget Office (CBO) said in a report on Thursday that will affect the negotiations over the US’ “fiscal cliff.”

The US, with US$16.3 trillion in debt, is nearing the US$16.4 trillion debt ceiling and Congress must act to raise it.

The CBO’s estimate assumes that the Treasury will use a series of “extraordinary” steps, as it has done in the past.

The estimate, CBO said, is subject to adjustment based on actual revenue collections and payments.

“Given the magnitude of the government’s daily cash flows and uncertainty about the size of certain key transactions over the next few months, it is difficult to be precise about the date on which the Treasury will lose its authority to borrow additional funds,” the report said.

The US Treasury has said publicly only that it expects to use up the extraordinary measures by early next year.

Lawmakers have been sparring over how to address the debt limit as part of the fiscal cliff, the more than US$600 billion in automatic tax increases and spending cuts scheduled to take effect next month.

Democrats want the debt-limit increase to occur as part of an agreement to avert the fiscal cliff.

Jay Carney, White House press secretary, said on Wednesday that he expected that Congress would increase the limit “without drama.”

US House Speaker John Boehner, an Ohio Republican, on Thursday reiterated his condition for increasing the debt limit. Any increase, he said, should be accompanied by an equal cut in spending.

“If we’re going to talk about the debt limit in this, there’s going to be some price tag associated with it,” he said.

Lawmakers went right up to the deadline in August last year before agreeing to the latest increase in the debt limit. The agreement included caps on domestic spending and set up US$1.2 trillion in automatic spending cuts, half in defense programs, scheduled to begin next month.

US Representative Sander Levin of Michigan said in a statement that the last year’s episode caused the country economic harm.

“The American people spoke loud and clear that they are tired of Republicans manufacturing crisis after crisis and hurting the American economy in the process,” said Levin, the top Democrat on the House Ways and Means Committee. “It’s time for Republicans to start acting like the adults that Americans want them to.”

The US staved off hitting the debt limit until August of last year by taking what US Treasury Secretary Timothy Geithner called “extraordinary measures” that included declaring a “debt-issuance suspension period” under the statute governing the Civil Service Retirement and Disability Fund. That allows the US to redeem existing Treasury securities held by that fund as investments.

The Treasury also stopped issuing State and Local Government Series securities which help fund expenditures such as infrastructure projects.

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