On December 26, Treasury Secretary Timothy Geithner sent a letter to congressional leaders warning that the United States government will exceed its statutory debt ceiling limit of $16.4 trillion on Monday, December 31.
The New Year’s Eve timeframe can be extended by approximately two months by the U.S. Treasury using so-called “extraordinary measures” to facilitate government funding and continue making payments without issuing more government debt.
In February 2012, reports by both Politico and CNN Money predicted that the United States Treasury could reach its legal borrowing limit before the November election, which would have made the issue a pressing national concern going into the final stages of the race for the presidency and congressional offices. A week before Election Day, the Treasury announced the debt ceiling could be reached by the end of 2012.
Treasury Secretary Geithner issued the sudden warning – only one day after the Christmas holiday and during the contentious fiscal cliff negotiations – with a matter-of-fact letter that read:
“I am writing to inform you that the statutory debt limit will be reached on December 31, 2012 and to notify you that the Treasury Department will shortly begin taking certain extraordinary measures authorized by law to temporarily postpone the date that the United States would otherwise default on its legal obligations.”
Geithner explained that the Treasury will use “extraordinary measures” that “can create approximately $200 billion in headroom under the limit. Under normal circumstances, that amount of headroom would last approximately two months.”
The secretary closed the letter by writing, “Treasury will provide more guidance regarding the expected duration of these measures when the policy outlook becomes clearer.”
In political terms, the revelation about the timing of the debt ceiling will play a pivotal role in compelling President Barack Obama and congressional leaders in both the Democrat and Republican parties to resolve the impasse on the fiscal cliff before Monday.
Two months of extraordinary measures by the Treasury will give President Barack Obama, as well as Democrat and Republican congressional leaders, a small window of opportunity to reach an accord regarding taxes, spending cuts, the fiscal cliff, and the extension of the debt ceiling limit.
As a member of President Barack Obama’s cabinet – as well as one of his chief economic advisers – Geithner is sure to come under intense scrutiny by congressional Republicans for delaying the release of the information about the debt ceiling until only five days before the borrowing limit will be reached.
Geithner has previously announced that he will be stepping down as Treasury secretary in President Barack Obama’s second-term.
Earlier in December, The New York Times speculated that Jacob Lew, the current White House chief of staff, is the most frequently mentioned candidate to fill the position when Geithner departs. Shortly after the election, The Atlantic published an opinion piece suggesting President Obama consider New York Mayor Michael Bloomberg for Treasury Secretary.
The extension of the current debt ceiling may very well become intertwined with the confirmation process for the next Treasury secretary. Democrats will control the U.S. Senate, giving them control over the confirmation hearings.
Steven Holmes is the Los Angeles Political Buzz Examiner.
Please follow Steven Holmes on Facebook and Twitter and Subscribe to Email Updates to receive links when new articles are published.