Debt Limit Nearly Reached

Last week, Treasury Secretary Timothy Geithner wrote to Congressional leadership indicating that the federal government has nearly reached the statutory limit on the federal debt and has suspended issuing certain Treasury securities.   As a result of stronger than expected tax receipts, the Treasury Department has until about August 2 to employ these and other extraordinary measures to extend borrowing authority.  If the debt ceiling is not increased by that time and the U.S. begins to default on its obligations, financial markets here and around the world would be impacted.  In addition, a “broad range of government payments would have to be stopped, limited or delayed, including military salaries, Social Security and Medicare payments, interest on debt, unemployment benefits and tax refunds.”   Secretary Geithner stated that to “use the full faith and credit of the United States as a bargaining chip to advance partisan policy agendas would be irresponsible.”  He urged Congressional action on approving an increase in the debt limit as soon as possible.

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