US to reach debt limit on New Years Eve

US to reach debt limit on New Years Eve

2012-12-27 07:30

Washington - The United States government will reach its statutory $16.39 trillion debt limit - a ceiling imposed by Congress - on Monday, Treasury Secretary Timothy Geithner said.

In a letter Wednesday to Senate Majority Leader Harry Reid, Geithner said the treasury would take "extraordinary measures" to postpone the day the US could default on its liabilities, but could not say how long it had.

Geithner warned that if the White House and US lawmakers fail to agree on a budget compromise to prevent the economy plunging over the "fiscal cliff", also due on December 31, then he could not be sure when the money would dry up.

He said the extraordinary measures - halting the issuance of some state and local government bonds - could create approximately $200bn in headroom that under normal circumstances would last about two months.

But he added: "However, given the significant uncertainty that now exists with regard to unresolved tax and spending policies for 2013, it is not possible to predict the effective duration of these measures."

As of midday (17:00 GMT) Saturday, the United States will "begin taking certain extraordinary measures authorized by law to temporarily postpone the date the United States would otherwise default on its legal obligations."

Geithner's letter came as the White House and Republican lawmakers were locked in an impasse about the "fiscal cliff," a package of steep tax hikes and spending cuts that are due to take effect in January.

Experts say a failure to strike a compromise on the matter by New Years Eve could plunge the world's biggest economy into recession, and wrangling over the debt ceiling will only increase the political and economic uncertainty.

Already in July of this year, Washington went through a vicious political battle over raising the debt ceiling. In the end, the fight culminated in the poison pill compromise that has become the fiscal cliff trajectory.

  • duncan.gill1 - 2012-12-27 10:11

    The end is nigh!

      paul.prinsloo3 - 2012-12-30 12:42


  • allan.nesbitt.3 - 2012-12-27 10:52

    And they were worried about the Mayan story.

  • armand.horn.58 - 2012-12-27 12:48

    "Experts say a failure to strike a compromise on the matter by New Years Eve could plunge the world's biggest economy into recession" Thus, as long as the Yanks can borrow and print money everything is honkey dory??

  • sean.bagley.50 - 2012-12-27 13:21

    The recent rising of the Debt Ceiling meant America could afford paying its bills,not some sort of bargaining chip so as to prevent the US Economy from crashing.Extended tax cuts for all Americans below the $250,000 a year were agreed upon months ago.But it's the GOP led House of Representatives that Obama is still waiting for so as to the pass the Bill and get it signed.The GOP's refusal the bring this Bill up for a vote is the reason why America is heading over the "fiscal cliff".The GOP is being its usual obstructionist party as they've always have been.They've learned absolutely nothing from the George Bush era and how to destroy a balanced budget.At least Bill Clinton paid his country's debts and handed Bush a surplus economy back in 2001. The GOP is basically holding the middle classes in America hostage for corporate welfare and entitlements or tax cuts as it were,whilst shielding the millionaires in America. Social Security spending,MediCare and Defence makes up 2/3rd of the US entire budget. Cutting spending on just those 3 will still leave America with a whopping $400billion a year in the red.Having said that reducing the SSI outgoings won't reduce the deficit as it is funded by payroll tax.The best time for austerity measures is when your economy is booming,not when it's depressed!

  • J.Stephen.Whiteley - 2012-12-27 14:34

    I agree. Boehner, as leader of the Republicans (I hadn't known, by the way, that this party was nicknamed GOP "Grand Old Party") should take the whip off those Republicans in the House of Representatives who want to support Obama's measures. Then it will be the Democrats' responsibility. But even this is a short term solution. The Americans still have to learn the art of Coalition.

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