UPDATE 3-U.S. gov't poised to hit debt limit before 2013

Wed Oct 31, 2012 5:01pm EDT

* U.S. Treasury's advisers say fiscal cliff hurting economy

* U.S. still plans to issue floating-rate notes next year

* Treasury says "important" to raise debt limit in timely manner

By Rachelle Younglai

WASHINGTON, Oct 31 (Reuters) - The Obama administration said on Wednesday that the nation would hit the legal limit on its debt near the year's end, although it can tap emergency measures to stave off a default and keep the government running into early 2013.

As of Monday, the U.S. Treasury was $235 billion below the $16.4 trillion statutory ceiling on the amount it can borrow. That gives the government enough funds to pay its bills, including interest on its debt and retirement health benefits, until the end of the year, the Treasury said, reiterating a forecast it made in August.

If Congress fails to raise the debt limit, analysts expect the Treasury will run out of options to avoid a default some time in the latter half of February. However, the forecast could change dramatically depending on how the administration and Congress deal with the massive tax increases and spending cuts due to go into effect at year-end.

After Tuesday's presidential and congressional elections, Washington will have less than two months to find a solution to the so-called fiscal cliff - the $600 billion in tax increases and budget cuts that could fuel a fresh recession.

Treasury officials, briefing reporters on debt sale plans, said it was urgent that Congress act to increase the nation's borrowing authority.

"As we saw last summer, it is important that the debt limit is raised in a timely manner," said Treasury Assistant Secretary Matthew Rutherford.

A political fight last summer over raising the debt ceiling pushed the United States to the brink of default and prompted Standard and Poor's to downgrade the country's top-tier credit rating. A congressional watchdog agency said the battle also drove up Treasury's borrowing costs.

"FISCAL CLIFF" CONCERNS WEIGH ON ECONOMY

Deep divisions between Democrats and Republicans over taxes and government spending once again carry the potential for a costly policy clash over budget policy.

A group of Wall Street firms that advises the Treasury on borrowing needs warned that the prospect the nation could run into the fiscal cliff was already weighing on the U.S. recovery. Business investment slumped in the third quarter, taking a bite of economic growth.

"A timely and orderly resolution of this uncertainty would contribute meaningfully to an improvement in the economic outlook," the firms said in a report to Treasury Secretary Timothy Geithner.

The Treasury announced plans to auction a total of $72 billion in 3-, 10- and 30-year debt securities next week to refund maturing debt and raise $8.9 billion in new cash. The department expects to keep its debt sales stable in coming months.

Earlier this week, the Treasury cut its borrowing estimates for the final quarter of the year due to higher-than-expected revenues and less government spending.

The Treasury said it still had not made a decision on whether to allow investors to bid on securities that offer negative interest rates.

It said it still planned on issuing floating-rate notes late next year and Rutherford dismissed suggestions that investigations into key British benchmark interest rate Libor was complicating that plan.

He said the Treasury would be asking market participants to weigh in on the best design features for the floating-rate note, including the reference index.

The status of Libor, or the London Interbank Offered Rate, is in flux as British authorities grapple with how to improve the rate-setting process after Barclays Plc admitted it rigged the rate for its own benefit.

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Comments (1)
stambo2001 wrote:
Trillions upon trillions of dollars in debt. No budget in last 4 years. No plan to deal with the ‘fiscal cliff’. No manufacturing. Printing money out of thin air. +8% unemployment. Double the amount of people on food-stamps from 4 years ago. But vote obama! He may have no plan, he may have no experience, BUT he sure is a cool guy that reads prepared statements from a teleprompter well. Obama may not understand how to BE presidential BUT he is really good at LOOKING presidential…and that’s all that matters in america today.

The old left was against war, the left under barry is more neocon than the neocons. Why the left under barry don’t even bother with going to congress, nope. The left under barry makes up terms like ‘kinetic military action’ to wash their shame away.

The old left was against going to war. Remember it was the left that promoted ‘burning your draft cards’?! But the left today under barry consider dodge drafting a mortal sin. The left under barry are trying character assassination on The Omni for being a ‘conscious objector’? Hypocrites much?

The old left was against torture and indefinite detention. The left under barry not only kidnaps, renders and tortures willy-nilly around the globe but also locks people up indefinately, without charge, in Gitmo.

The old left was against assassination, but the left today under obama glorify extra-judicial assassination. As a matter of fact barrack hussein obama, the democratic president, has his very own personal list of people to be murdered. Even american citizens. Funny how you go from being abhorred of assassination to seeing it as a badge of honor. Yeah, funny.

And the lefties accuse the republican of not being the party of their fathers?! Nutcases. The left, under obama, have completely pulled a 180 degree turn on some of their most basic principles and not one of them gives one whit. Stupid is as stupid does.

Nov 01, 2012 10:43am EDT  --  Report as abuse
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