Treasury Expects to Hit Debt Limit by Feb. 20
 

Crazy whats goin on

Feb. 5
? By Jonathan Nicholson

WASHINGTON (Reuters) - The Treasury Department on Wednesday warned it was about two weeks away from hitting the limit on the government's borrowing authority, possibly setting the stage for a contentious battle in Congress.

Without a hike in the ceiling, Treasury in theory runs the risk of an unprecedented default on the nation's debt. Still, that is unlikely as Congress has always acted before the last moment.

But getting a debt hike through Congress may be tough.

Democrats may want to use the issue to highlight what they say are profligate fiscal policies by the Bush administration, which has proposed a record-setting budget deficit in its latest budget.

Because the legislation is considered "must pass," it often attracts unrelated legislative provisions.

"The debt subject to limit is expected to reach the statutory ceiling ... on or about Feb. 20 and will likely remain above the current ceiling thereafter," said a Treasury statement issued with the details of Treasury's upcoming quarterly series of securities auctions, known as "refunding."

"If the statutory debt ceiling is not raised, the Treasury will have to begin to use a number of stopgap devices -- some costly -- to manage debt subject to limit, which have been previously utilized under established legal authority," Treasury said.

On Wednesday, the debt subject to the limit stood at $6.342 trillion, about $58 billion from the $6.400 trillion borrowing limit.

DEMOCRATS POUNCE

House of Representatives Democrats were quick to call attention to Treasury's warning.

"This is the second time in less than a year that the statutory debt ceiling has needed to be raised, and a sign of more to come in the future," said John Spratt, ranking member of the House Budget Committee.

Spratt said the proposed new tax cuts put forward by Bush would only make things worse. "In effect, the Bush administration is proposing that we cut taxes, and then borrow to make up for the revenues lost."

In June 2002, Treasury won an increase to the current ceiling, but only after it twice turned to creative accounting techniques that used government workers' retirement funds to make room under the debt ceiling. It probably would use those techniques again, but said they may only give it breathing room until the start of April.

"That's our best forecast," said Peter Fisher, Treasury's undersecretary for domestic finance, in a briefing with reporters on Wednesday.

Treasury officials said exactly when it will be forced to use stopgap financing or run out of room under those measures will depend on cash flows, including the traditional April flood of income tax payments.

Last year, that tide helped Treasury get to late summer before Congress raised the limit. Fisher said because of the range of error in Treasury's forecasts, it could happen again.

He declined to comment on the "sequencing" of steps Treasury would take under stopgap financing to avoid piercing the limit.

They'll just raise the spending cap. This ain't the NFL.. we don't have a hard cap. More like the NBA with a soft cap. :thumbsup

Fucking sad though...