US is running out of money: the debt
ceiling
Yahoo Newss/Reuters
Snow urges Congress to raise debt limit
December 29, 2005
WASHINGTON (Reuters) - U.S. Treasury Secretary John Snow warned lawmakers on
Thursday that a legally set limit on the government's ability to borrow will be
hit in mid-February and urged Congress to raise it quickly.
Failure to do so potentially risks throwing the country into its first
default in history, Snow warned in what has become virtually an annual rite as
U.S. borrowing needs spiral.
"The administration now projects that the statutory debt limit, currently
$8.184 trillion, will be reached in mid-February 2006," Snow said in a letter
to 21 members of the U.S. House of Representatives and Senate released by
Treasury after financial markets had closed.
Snow said that Treasury, if the debt limit was not raised by then, would
have to take "extraordinary actions" to keep paying its bills for everything
from Social Security to national defense spending.
Even if Treasury took "all available prudent and legal actions to avoid
breaching the statutory debt limit, we anticipate that we can finance
government operations no longer than mid-March."
The debt limit was last raised in November 2004 by $800 billion to its
current level. The letter to Congress does not specify an amount the Treasury
wants the ceiling set at this time.
But he said quick action was needed to preserve the U.S. ability to borrow
in global capital markets at the lowest rates possible.
"A failure to increase the debt limit in a timely manner would threaten this
unique and important position," Snow said.
The call for an increase in the debt ceiling typically provokes a round of
criticism from opposition politicians over excessive government spending and
the process is drawn out until nearly the last possible moment.
Treasury officials had said in November it was bracing for hefty borrowing
needs in the January-March quarter, likely around a record $171 billion, and
that it likely would hit the debt limit in that period.
Among other factors, the Treasury cited increased spending for rebuilding
Gulf Coast areas hit hard by hurricanes Katrina and Rita.
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