The Treasury Department reiterated that U.S. authority to borrow under the $14.29 trillion debt limit will expire on Aug. 2.
The Treasury “continues to project that the United States will exhaust its borrowing authority under the debt limit” on that date, Mary Miller, the Treasury’s assistant secretary for financial markets, said in a statement today.
“I think this indicates they are growing more certain about the Treasury’s cash flow and any hope they could extend the deadline further is fading,” Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said in an interview. “This is the date, and policy makers need to be working with that in mind. There had been some hope that the deadline could be pushed further off, but that doesn’t seem likely now.”
The House of Representatives voted 318-97 yesterday to defeat a measure that would have raised the debt limit by $2.4 trillion without spending reductions. Democrats claimed that the ballot was rigged to ensure its defeat.
Treasury Secretary Timothy F. Geithner “continues to urge Congress to avoid the catastrophic economic and market consequences of a default crisis by raising the statutory debt limit in a timely manner,” Miller said. Geithner first said last month the U.S. could keep borrowing until about Aug. 2.
The U.S. stayed under the debt limit in May by taking what Geithner called “extraordinary measures,” including declaring a “debt-issuance suspension period” under the statute governing the Civil Service Retirement and Disability Fund. That allows the U.S. to redeem existing Treasury securities held by that fund as investments.
Last week, Republicans announced yesterday’s vote as a way to demonstrate that lawmakers don’t support extending the debt limit unless agreement is reached with President Barack Obama’s administration on significant cuts to curb government spending.
“No one expects much progress on this until July,” said Lou Crandall, chief economist for the Wrightson ICAP LLC unit of London-based ICAP Plc, the world’s largest broker of trades between banks. “It is just the nature for people to not show their hand until the deadline.”
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