Tags: Bipartisan | Policy | debt | ceiling

Bipartisan Policy Center: Debt-Ceiling Clock Running Out

By Michael Kling   |   Wednesday, 28 Nov 2012 01:31 PM

The United States could default on its debt if Congress doesn't raise the debt ceiling soon, warns a new analysis from the Bipartisan Policy Center.

If the ceiling — now set at $16.394 trillion — is not raised, the government would be unable to borrow more and would be unable to meet its debt payments as early as February.

The government will reach its debt limit in the last week of December, according to the policy center. However, the Treasury Department can use "extraordinary measures" to borrow another $197 billion to continue paying the country's bills. For instance, it can temporarily stop contributions to federal employees' retirement funds, and then make up the difference after the debt limit is increased.

Editor's Note: You Owe It to Yourself to Know What Obama and Bernanke Are Hiding From Americans

Those measures will run out in February, possibly in January if the government spends more than expected, the think tank says.

"These measures are limited in size, meaning that they will only provide a finite amount of additional capacity to ensure timely payments," the report states.

When the government reached its debt limit in 2011, Republicans insisted on spending cuts, and Congress increased the limit only after agreeing to over $2 trillion in spending cuts over a decade. It created what's called sequestration and what is now called the fiscal cliff, a combination of severe tax increases and spending cuts going into effect Jan. 1.

"Many scars remain from last summer’s debt limit negotiations," the report notes. "Indeed, one of them — sequestration — is set to deliver sharp pain at the start of next year."

Senate Majority Leader Harry Reid, D-Nev., said raising the debt ceiling must be part of an overall budget agreement on the fiscal cliff, according to Politico.

“We would be somewhat foolish to work out something on stopping us from going over the cliff and then a month or six weeks later, Republicans pull the same game they did before and say, ‘We’re not going to do anything unless this happens, or we’re not going to agree to increase the debt ceiling,’” Reid said at a news conference Tuesday, according to Politico.

Editor's Note: You Owe It to Yourself to Know What Obama and Bernanke Are Hiding From Americans

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