Geithner to Congress: Treasury to take measures to postpone U.S. default

Timothy Geithner

Timothy Geithner

Treasury Secretary Timothy Geithner told Congress in a letter last week that the Treasury will begin taking certain lawful measures aimed at postponing the date that the U.S. would default on its financial obligations.

“These extraordinary measures…can create approximately $200 billion in headroom under the debt limit,” Geithner said. “Under normal circumstances, that amount of headroom would last approximately two months. However, given the significant uncertainty that now exists with regard to unresolved tax and spending policies for 2013, it is not possible to predict the effective duration of these measures.”

The measures available to the Treasury include the suspension of sales of state and local government series Treasury securities, the determination of a “debt issuance suspension period” to redeem existing and suspend new investments of the Civil Service Retirement and Disability Fund and Postal Service Retirees Health Benefit Fund, the suspension of reinvestment of the Government Securities Investment Fundinflatables for sale in canada, and the suspension of reinvestment of the Exchange Stabilization Fund.

All of the measures have been used during previous debt limit stalemates and create or conserve headroom beneath the debt limit. The measures, however, are limited and can only briefly postpone the need for an increase in the debt limit.

“If left unresolved, the expiring tax provisions and automatic spending cuts, as well as the attendant delays in filing of tax returns, would have the effect of adding some additional time to the duration of the extraordinary measures,” Geithner said.

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