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December 26, 2012 (TSR) – The United States federal government will reach its debt limit of 16.4 trillion U.S. dollars on December 31, which is the amount the U.S. federal government allowed to borrow, U.S. Treasury Secretary Timothy Geithner said on Wednesday.
In a letter to congressional leaders on Wednesday amid the last- ditch efforts of U.S. lawmakers to avoid the looming “fiscal cliff, ” Geithner said the Treasury “will shortly begin taking certain extraordinary measures authorized by law to temporarily postpone the date that the United States would otherwise default on its legal obligations.”
Those accounting measures could “create approximately 200 billion U.S. dollars in headroom under the debt limit” and it was expected to help the federal government run for about two months, said Geithner.
However, given the significant uncertainty existing due to the unresolved tax and spending policies for 2013, the so called ” fiscal cliff,” it was not possible to predict the effective duration of these measures, he added.
Unless U.S. Congress acts by the end of the year, a combination of tax increases and sweeping spending cuts totaling about 600 billion dollars will kick in, the effects of which could drive the economy back into recession.
The Treasury has taken extraordinary measures including asset sales in the past to avert the default on U.S. legal obligations in times of 11th-hour fiscal negotiations between Democrats and Republicans.
The nation’s next public debt limit increase amount must be matched or exceeded by government spending cuts amount, U.S. House Speaker John Boehner, the top Republican lawmaker of the lower chamber, has repeatedly reiterated the GOP stance during the undergoing “fiscal cliff” negotiation.
Boehner and other GOP congressional leaders on Wednesday urged the Senate to act first to resolve the “fiscal cliff” in a joint statement.
U.S. lawmakers were set to return to Washington Thursday. Democrats and Republicans have less than one week to come up with a deficit reduction plan to avert the year-end “fiscal cliff”, which will affect nearly every U.S. family.