The United States has reached its self-imposed debt ceiling of $14.29 trillion, Treasury Secretary Timothy Geithner told Congress on Monday. The federal government will have to dip into retirement funds for federal employees just to stay open, Geithner said.
The announcement immediately heightened political tensions in Washington. The Obama administration is urging Congress to increase the debt limit or risk a repeat of the global recession.
“As the recent financial crisis demonstrated, a severe and sudden blow to confidence in the financial markets can spark a panic that threatens the health of our entire global economy and the jobs of millions of Americans,” Geithner wrote in a letter to Sen. Michael Bennet (D – CO).
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Meanwhile, Congressional Republicans demand big spending cuts.
“This is actually a great opportunity to address this burgeoning problem,” said Sen. Mitch McConnell (R – KY). “We have $50 trillion dollars in unfunded liabilities, that is, promises we’ve made [regarding] very popular programs [including] Medicare, Social Security, Medicaid, that we can’t meet.”
The Treasury Department can keep the federal government functioning for about 11 weeks by discontinuing payments into the Civil Service Retirement and Disability Fund. That will give the government about $12 billion. The funds will be repaid after Congress raises the debt ceiling, the Treasury said.
But that fix can only last until Aug. 2. After that, the government will shut down unless Republicans and Democrats find a compromise.
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Image: AgnosticPreachersKid, via Wikimedia Commons
Christopher Maag Contributing writer for Credit.com, Chris graduated with honors from the Columbia University Graduate School of Journalism, and has reported for a number of publications including The New York Times, TIME magazine and Popular Mechanics. Have a question for our experts? Email them at CreditExperts@Credit.com.
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