Treasury Deploys 'Extraordinary Measures' as Borrowing Cap Hits

Sunday, 19 May 2013 10:12 AM

By Sandy Fitzgerald

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The Treasury Department is employing special measures limiting spending so that the federal government can keep paying its bills after the nation reached its borrowing limit last week.

Treasury Secretary Jack Lew told Congress on Friday that he was ready to start the "standard set of extraordinary measures."

Treasury on Friday stopped issuing State and Local Government Series securities, which state and local governments use to refund municipal bond deals.

Treasury can also stop new investments in federal employee retirement funds, and in the Exchange Stabilization Fund, which buys and sells foreign currencies. The moves are expected to free billions of dollars the government can use to pay its bills.

At the beginning of the year, Congress suspended the nation's $16.4 trillion borrowing limit until May 19. The limit was automatically boosted to cover whatever borrowing the Treasury incurred during the period, so the limit jumped by about $300 billion, to $16.7 trillion, The Hill reported.

Lew said in a letter to Congress that it likely has until shortly after Labor Day to raise the borrowing cap before the nation's finances reach a damaging default. Lew said it's difficult to determine an exact deadline, but he is confident the government can keep paying its obligations until this fall, despite earlier estimates that pinpointed a deadline in the summer months.

Lew, though, did not offer to negotiate, saying the debt limit is too serious to be used as a bargaining chip and that fiscal talks should be conducted separately
"The creditworthiness of the United States is non-negotiable," Lew said in the letter. "The question of whether the country must pay obligations it has already incurred is not open to debate."

Republicans remain determined to use the debt limit as a way to force concessions, on issues such as entitlement cuts or tax reform in upcoming talks.

The deficit is estimated at less this year than had been first estimated because of increased tax revenue and lower spending. Lew said a payout from Fannie Mae will also turn over $60 billion in profits in June, which will ease the government's finances.

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