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Treasury Department: Debt Ceiling Will Be Reached On December 31st

The Treasury Department announced today that the nation would reach the legal borrowing limit established by Congress in August 2011 before the end of this year:

U.S. Treasury Secretary Timothy Geithner said Wednesday that the nation’s statutory debt limit will be reached on December 31 and the Treasury Department will take “certain extraordinary measures” to postpone the date.

In a letter to Senate Majority Leader Harry Reid (D-Nev.), Geithner said that the measures would add about two months — or an additional $200 billion — to the limit under normal circumstances. However, given the tax and spending uncertainty due to the so-called fiscal cliff, Geithner said, he cannot predict how much time the measures will actually allow.

The debt ceiling is the legal limit for Congress to borrow money. The 2011 summer debt ceiling crisis caused Standard and Poor’s to downgrade the credit rating of the United States and contributed to economic turmoil before Congress and President Barack Obama reached a deal to raise the limit.

The letter from Geithner to Reid comes as the fiscal cliff is set to happen at the end of the year, with no apparent deal close in Congress. The cliff will bring austerity — a combination of spending cuts and tax increases — which many expect to slow economic growth in the coming year.

Now, it’s possible that going over the Fiscal Cliff may actually buy us some time on the debt ceiling as the spending cuts and tax increases kick in, but it’s not likely to be a very long amount of time. At some point before Easter, Congress is going to have to deal with the same issue it deal with in the Summer of 2011. Given how badly things went then, I’m not at all optimistic.

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About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May, 2010 and also writes at Below The Beltway. Follow Doug on Twitter | Facebook

Comments

  1. When does Treasury’s borrowing authority run out. In 2011 we exceeded the ceiling and were able to borrow an additional two and a half months. The roof might cave in very soon.

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  2. Gustopher says:

    Woo-hoo, economic uncertainty! Thanks Republicans.

    Like or Dislike: Thumb up 4 Thumb down 1

  3. JWH says:

    I am beginning to think the only way for this logjam to break would be for the Republican Party to fracture. If it suddenly consists of a center-right “Republican Party” and a far-right “Tea Party,” then perhaps some level of coalition-building and compromise will be possible.

    Like or Dislike: Thumb up 4 Thumb down 1

  4. Tsar Nicholas says:

    Seems to me as though the book already has been written.

    They’ll “go over the cliff,” and let the Bush tax cuts expire. That’s something for which the loopy left in any case has been pining for almost a decade.

    Then the very next week (perhaps even the next day) they’ll introduce a bill reinstating the same Bush tax cuts, in whole or in part, for everyone earning less than X or Y per year. Presumably $250k but maybe up to $500k. It’ll pass with flying colors. Who’s going to vote against a tax cut for the middle class?

    Then later in the year the Dems will reinstate the sequestered social spending cuts by tying them into things for which the GOP realistically must vote, e.g., funding troops in the field.

    The end results if all that should come to pass are that of a tax hike with no entitlement modifications and at the end of the day not much if anything in the way of spending reductions.

    Maybe that’s all along been the plan.

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  5. @Robert Prather:

    From the article it appears that Treasury will be able to stretch things until February or so, but that may depend on the impact of the whole Fiscal Cliff mess.

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  6. @Doug Mataconis: yeah, I hate that we have to go through this.

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  7. Jeff Fuller says:

    Here’s the opportunity for the Republican Congress to reform its image. Can you imagine how much goodwill they could gain if they voted to extend the debt ceiling now rather than have the Administration start all the money juggling to pay the debts Congress has already approved?

    Like or Dislike: Thumb up 2 Thumb down 0

  8. bill says:

    Memories……this is 3 yrs after his famous “deficits are unpatriotic” quote!

    At a July 2011 news conference, Obama said the government could increase tax revenues by $1.2 trillion over 10 years without raising income tax rates. It could be done, he said, “by eliminating loopholes, eliminating some deductions and engaging in a tax reform process that could have lowered rates generally while broadening the base.”

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  9. Scott O says:

    @bill:
    So you’re saying that Republicans now want the deal they rejected in 2011? Silly Republicans.

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  10. superdestroyer says:

    Maybe if Congress would just do its job, an FY13 federal budget would have been passed before August 2012 and Congress could have passed a debt ceiling increase to match the budget.

    However, if Congress refuses to pass a budget, then problems are going to occur. Congress should have been having hearing for the last 12 months on the budget, what to cut, and what taxes to raise. Yet, Congress just refuses to do their job.

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  11. Tillman says:

    Aww yeah! Riding off the fiscal cliff straight into government shutdown! Go Republicans, you crazy sons of bitches!

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  12. Gromitt Gunn says:

    @bill: Someone needs to rewatch their Schoolhouse Rock in order to understand how a bill becomes a law.

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  13. bill says:

    @Scott O: no, just an analogy of what obama flipped on again, the great leader that he is…..

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  14. Tyrell says:

    What happened to that proposal to audit the Federal Reserve ?

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  15. al-Ameda says:

    Opportunity after opportunity for Republicans to show how much they hate governing.

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