U.S. Treasury to Take Steps to Avoid Borrowing Limit

Timothy Geithner By CHRISTOPHER S. RUGABER, AP Economics Writer

WASHINGTON (AP) - The U.S. Treasury Department will begin taking steps to delay hitting the government's $16.4 trillion borrowing limit on Dec. 31.

Treasury Secretary Timothy Geithner said in a letter Wednesday to congressional leaders that the department will use accounting measures to save approximately $200 billion, which could keep the government from reaching the limit for about two months.

The move comes as President Barack Obama and the GOP congressional leadership are locked in negotiations over how to avoid a series of tax increases and spending cuts, known as the "fiscal cliff," that are scheduled to take effect in the new year.

Obama has sought to include an increase in the borrowing limit in the talks. But Speaker John Boehner and other Republican leaders have demanded concessions in return. The negotiations hit a stalemate last week. Obama and lawmakers are returning to Washington this week to resume talks.

Geithner says the negotiations over tax and spending policies make it difficult to predict how long he can delay reaching the borrowing limit.

The borrowing limit is the amount of debt the government can pile up. The government accumulates debt two ways: It borrows money from investors by issuing Treasury bonds, and it borrows from itself, mostly from Social Security revenue.

In 2011, Congress raised the limit to nearly $16.4 trillion from $14.3 trillion. Three decades ago, the national debt was $908 billion. But Washington spent more than it took in, and the debt rose steadily - surpassing $1 trillion in 1982, then $5 trillion in 1996. It reached $10 trillion in 2008 as the financial crisis and recession dried up tax revenue and as the government spent more on unemployment benefits and other programs.

In August 2011, the rating agency Standard & Poor's stunned the world by stripping the U.S. government of its prized AAA bond rating because it feared that America's dysfunctional political system couldn't deliver credible plans to reduce the federal government's debt. S&P decried American "political brinksmanship" and concluded that "the differences between political parties have proven to be extraordinarily difficult to bridge."

A year and a half later, the two political parties are still as deadlocked as ever.

Despite S&P's warnings and the political stalemate, investors still want U.S. Treasurys. Given economic turmoil in Europe and uncertainty elsewhere, U.S. government debt and U.S. dollars look like the safest bet around.

That is why the interest rate, or yield, on 10-year Treasury notes has fallen from 2.58 Aug. 5, 2011 to 1.75 percent Wednesday.

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kd485

Our Nations debt is proof you don't need to be smart to vote, or hold office!

December 29 2012 at 2:27 PM Report abuse +1 rate up rate down Reply
white41990

Great just what this country and the rest of the world need lower rates, yeah good idea Ben Bernanke and Timothy Geithner thanks alot all you do by keeping rates at record lows is help the investors (mostly big banks) speculate and (shift our money) make more risky bets on the futures and commodities markets causing the consumer to lose confidence to spend again with so much uncertainty you create. The consumer and economy need rates to be at least 5.5% or more to sustain growth, create jobs, lower the price of gas, and give the economy its real source of exsistance, consumer spending with confidence to do so. A confident consumer doesn't spend his/her money when they cannot be rewarded for saving in the first place, raise interest rates so those who want to retire and live off there savings and interest can, and so those who want jobs can have them, if you see the unemployment rate falling understand saying welcome to Walmart is not a job.

December 27 2012 at 1:42 AM Report abuse +3 rate up rate down Reply
commonprosperity1301

dtgrts

December 27 2012 at 12:36 AM Report abuse rate up rate down Reply
Gumby

I can give you two of the leading causes of budget deficits now. One is rising energy prices. Two is Old Geezer Boom Generation OGBG !

December 27 2012 at 12:19 AM Report abuse -2 rate up rate down Reply
1 reply to Gumby's comment
jdykbpl45

Wrong. It is the spend the money we don't have generation. Democrats and Obama supporters.

December 27 2012 at 8:12 AM Report abuse +3 rate up rate down Reply
gmydogbud

Tim is at it again! GOD help us all!!!

December 26 2012 at 7:54 PM Report abuse +2 rate up rate down Reply
STAN

" the financial crisis and recession dried up tax revenue and as the government spent more on unemployment benefits and other programs."
Looks like he answered his own question about how to solve the problem....more jobs, to recreate the tax bases.

December 26 2012 at 5:53 PM Report abuse +4 rate up rate down Reply
1 reply to STAN's comment
theycallmeroy3

Its a beautiful thing when a simple direct paragraph is 100% accurate.

December 26 2012 at 6:55 PM Report abuse -1 rate up rate down Reply