Treasury Maneuvers in Case Debt Limit Remains

Wednesday, 27 Apr 2011 03:46 PM

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The Treasury Department has been working behind the scenes to come up with a contingency plan in case Congress doesn’t raise the national debt limit as it advances rapidly toward its $14.3 trillion ceiling.

Treasury Secretary Timothy Geithner has been maneuvering to conserve cash and emptied a $200 billion cash-management account to provide breathing space to pay bills without new borrowing, The Washington Post reported.

The steps that Geithner has at his disposal include suspending the issuance of special securities that help state and local governments manage their finances and declaring a “debt issuance suspension period.” Such a move would allow him to borrow from the federal workers pension fund, the Post reported.

Geithner can also pay investors first for interest they’re owed on the debt, a move conservatives argue would allow the government to avoid default and the predictions of economic Armageddon.

Use of such evasive measures, however, could lead to higher interest rates, and market confidence would be shattered if the United States had to cut off pay to combat troops or stop issuing Social Security checks, the Post reported.

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