WASHINGTON (Reuters) - U.S. Treasury Secretary Steven Mnuchin on Thursday called on Congress to raise the federal debt ceiling “at the first opportunity” and announced the first of several likely cash management measures aimed at staving off a U.S. default.
The Treasury said it would suspend sales of State and Local Government Series securities, known as “slugs,” effective noon EDT on March 15. A debt ceiling suspension expires at the end of that day.
“Honoring the full faith and credit of our outstanding debt is a critical commitment,” Mnuchin wrote in a letter to House of Representatives Speaker Paul Ryan on Thursday. “I encourage Congress to raise the debt limit at the first opportunity so that we can proceed with our joint priorities.”
Mnuchin said additional “extraordinary measures” to avoid default would likely be taken.
The United States is one of only a few nations where the legislature must approve periodic increases in the legal limit on how much money the federal government can borrow.
Congressional Republicans in the past have used debt ceiling deadlines as leverage to demand spending cuts. But with the party now in control of the White House and both chambers of Congress and hoping to pass major tax and healthcare legislation, it remains unclear whether conservative Republicans will challenge President Donald Trump over the debt ceiling.
A debt limit standoff in 2011 brought the government to possibly within hours of missing some payments before Congress increased the cap, prompting Standard & Poor’s to downgrade the U.S. credit rating for the first time ever.
Rather than setting a specific dollar limit on the debt, Congress in October 2015 simply suspended the ceiling until midnight on March 15, allowing normal borrowing to continue.
The debt ceiling will reset at the total debt level outstanding on that day, but Congress will need to approve a new debt ceiling or extension. As of Tuesday, the federal debt stood at about $19.85 trillion, according to Treasury data.
Analysts at the Bipartisan Policy Center, a Washington think tank, estimated last week that a U.S. payments default could be staved off until October or November with Treasury’s cash conservation efforts.
Suspension of slugs, which are used by state and local governments to temporarily store the proceeds of municipal bond sales and ensure tax compliance, is normally the first of these. Other steps include suspending investments in federal employee pension plans and halting sales of U.S. savings bonds.
Reporting by David Lawder; Editing by Chizu Nomiyama and Leslie Adler