Treasury Secretary Timothy F. Geithner predicts the federal government will reach its debt ceiling no later than May 16 and urged Congress to quickly raise the limit or risk another national financial crisis.
“It is critical that Congress act to increase the debt limit so that the full faith and credit of the United States is protected,” Mr. Geithner wrote to Senate Majority Leader Harry Reid in a letter released Monday.
The secretary wrote the Nevada Democrat that while the projection could change, it’s unlikely it would move later than the target date.
Mr. Geithner said the projection was based on “the expected level of tax receipts, the timing of our commitments and obligations over the next several weeks, and our judgment concerning the level of cash balances we need to operate.”
He said Treasury will update its debt limit projection in early May.
The debt ceiling - the government’s legal limit on how much it can borrow to pay for its operations - was last raised to $14.294 trillion in February 2010.
Congress is considering whether and how much to extend the debt limit again. But many Republicans say they won’t agree to raise the ceiling unless it’s accompanied by big changes to the way the government taxes and spends.
“The only way that I will vote on this debt limit thing is if it’s the last time we do it, plus a series of meaningful reforms that put us on a path towards fiscal sanity,” Sen. Marco Rubio, Florida Republican, said on “Fox News Sunday.”
Increasing the debt limit wouldn’t increase the government’s financial obligations. Rather, it would would allow Treasury to fund obligations Congress already has established.
If the debt limit isn’t increased, a broad range of government payments would have to be stopped, limited or delayed, including military salaries and retirement benefits, Social Security and Medicare payments, interest on the debt, unemployment benefits and tax refunds, Treasury says.
Mr. Geithner warned if the government defaults on its legal obligations the consequences would be harsh, including significantly higher interest rates and borrowing costs, declining home values and reduced retirement savings for Americans.
“Default would cause a financial crisis potentially more severe than the crisis from which we are only now starting to recover,” he said. “For these reasons, default by the United States is unthinkable.”
If Congress doesn’t act by the time the debt limit is reached, Treasury can take certain extraordinary measures to postpone the deadline for eight weeks.
“The longer Congress fails to act, the more we risk that investors here and around the world will lose confidence in our ability to meet our commitments and our obligations,” Mr. Geithner wrote.
• Sean Lengell can be reached at slengell@washingtontimes.com.
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