POLITICS
Updated December 31, 2012, 10:36 p.m. ET
U.S. Acts to Buy Time on Borrowing Limit
By ERIC MORATH
The U.S. government brushed up against its $16.394 trillion borrowing limit Monday, sparking extraordinary measures—including halting investments in government workers' retiree funds—to buy time before a default.
Treasury Secretary Timothy Geithner said a "debt issuance suspension period" would begin Monday and last until Feb. 28. That declaration, made in a letter to congressional leaders, allowed the Treasury to take a series of one-time steps to free up about $29 billion in headroom beneath the debt ceiling.
More than half of the additional headroom gained Monday will come from the Treasury Department redeeming an interest payment that ordinarily would have been reinvested in the civil-service fund. The Treasury will also stop making new investments into that fund during the suspension period.
Because of the debt limit, "I will be unable to invest fully the portion of the Civil Service Retirement and Disability Fund not immediately required to pay beneficiaries," Mr. Geithner wrote.
The Feb. 28 date, however, doesn't equate to a hard and fast deadline for exhausting the government's borrowing capacity, and a Treasury official said the guidance as to when the U.S. would face a default hasn't changed from Mr. Geithner's prior letter to lawmakers.
Last week, Mr. Geithner said if not for the uncertainty regarding unresolved tax and spending policies for 2013 he could buy about two months' time through extraordinary actions, but given the still-fluid negotiations in Congress "it's not possible to predict the effective duration of these measures."
As lawmakers hammered out a last-ditch tax and spending deal, it appeared unlikely that the debt limit would be raised as part of any immediate deal.
Besides the civil-service fund, the postal service's fund for retiree health benefits will face the same changes, the Treasury said.
By law, the two funds are required to be made whole once the debt limit is increased, meaning current retirees and government employees won't be affected by the actions.
.
Last week, the Treasury suspended sales of state and local government series securities—special-purpose Treasurys known as "Slugs" that state and local governments use to comply with tax rules. The move doesn't increase headroom under the ceiling, but it stops the Treasury from piling on new public debt.
Treasury Secretary Timothy Geithner said a "debt issuance suspension period" would begin Monday and last until Feb. 28. That declaration, made in a letter to congressional leaders, allowed the Treasury to take a series of one-time steps to free up about $29 billion in headroom beneath the debt ceiling.
More than half of the additional headroom gained Monday will come from the Treasury Department redeeming an interest payment that ordinarily would have been reinvested in the civil-service fund. The Treasury will also stop making new investments into that fund during the suspension period.
Because of the debt limit, "I will be unable to invest fully the portion of the Civil Service Retirement and Disability Fund not immediately required to pay beneficiaries," Mr. Geithner wrote.
The Feb. 28 date, however, doesn't equate to a hard and fast deadline for exhausting the government's borrowing capacity, and a Treasury official said the guidance as to when the U.S. would face a default hasn't changed from Mr. Geithner's prior letter to lawmakers.
Last week, Mr. Geithner said if not for the uncertainty regarding unresolved tax and spending policies for 2013 he could buy about two months' time through extraordinary actions, but given the still-fluid negotiations in Congress "it's not possible to predict the effective duration of these measures."
As lawmakers hammered out a last-ditch tax and spending deal, it appeared unlikely that the debt limit would be raised as part of any immediate deal.
Besides the civil-service fund, the postal service's fund for retiree health benefits will face the same changes, the Treasury said.
By law, the two funds are required to be made whole once the debt limit is increased, meaning current retirees and government employees won't be affected by the actions.
.
Last week, the Treasury suspended sales of state and local government series securities—special-purpose Treasurys known as "Slugs" that state and local governments use to comply with tax rules. The move doesn't increase headroom under the ceiling, but it stops the Treasury from piling on new public debt.
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