US Treasury to take steps to avoid borrowing limit

Published on NewsOK Modified: December 26, 2012 at 5:24 pm •  Published: December 26, 2012
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WASHINGTON (AP) — The U.S. Treasury Department will begin taking steps on Friday 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. That could keep the government from reaching the limit for about two months.

The move comes as President Barack Obama and the GOP congressional leadership resume 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 any agreement to avoid the cliff. 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 try again.

Geithner says the negotiations over tax and spending policies make it difficult to predict how long he can delay reaching the borrowing limit. The absence of a specific timeframe may be intended to pressure Republicans to allow a debt limit increase in a potential budget deal.

For now, Treasury will take several steps to delay reaching the limit. Geithner said it will stop selling Treasury securities used by state and local governments to support their own sales of tax-exempt bonds. That will keep the department from accumulating more debt.

And the department will stop investing in government retirement funds.

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.

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