Treasury takes first steps to limit debt as cap looms

GMT 23:16 2015 Friday ,13 March

Arab Today, arab today Treasury takes first steps to limit debt as cap looms

Treasury Secretary Jacob Lew
Washington - AFP

The United States moved toward another political showdown over public debt Friday as the Treasury took steps to keep the government open and urged Congress to lift the borrowing limit.
In his second letter to Congress in a week, Treasury Secretary Jacob Lew warned Congress against "brinkmanship" that risks the credit rating of the world's largest economy.
"Protecting the full faith and credit of the United States is the responsibility of Congress, because only Congress can extend the nation's borrowing authority. No Congress in our history has failed to meet that responsibility," he wrote.
"The creditworthiness of the United States is not a bargaining chip, and I again urge Congress to address this matter without controversy or brinksmanship."
After a year without any cap, a new statutory debt limit of about $18.1 trillion comes into effect Monday, leaving the government unable to take on more debt to pay for its spending commitments.
With no action to raise the limit from Congress, Lew told lawmakers that, as in the past, the Treasury had started Friday to hold off issuing certain local government securities that count against the debt limit.
On Monday, he said, the Treasury will suspend debt issuance and reinvestments related to two civil service retirement funds.
"These actions have been employed during previous debt limit impasses," Lew wrote. "Accordingly, I respectfully urge Congress to raise the debt limit as soon as possible."
Analysts say the special measures could give the Treasury adequate leeway to continue funding the government's budget deficit for several months, possibly to September.
The government is expected to have a shortfall of $486 billion for 2015, roughly the same as 2014, according to the Congressional Budget Office.
Republicans and Democrats fought a series of battles over borrowings between 2011 and 2014 that roiled financial markets, caused an unprecedented downgrade of the country's triple-A debt rating by Standard & Poor's, and forced a partial government shutdown for 16 days in 2013.
The Republicans have used the limit to extract spending and tax concessions from Democratic President Barack Obama.
The two sides agreed to a one-year extension in February 2014, allowing the government to borrow as much as needed until March 16 this year.
The Republicans now control both houses of Congress, giving them both more leverage on the White House but also more responsibility in keeping the government going.
"I made it very clear after the November election that we're certainly not going to shut down the government or default on the national debt. We will figure some way to handle that," Senate Majority Leader Mitch McConnell said in a CBS television interview last Sunday.
"And, hopefully, it might carry some other important legislation that we can agree on in connection with it."

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