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The U.S. government is approaching the limit of its borrowing authority and will begin taking “extraordinary measures” to delay a vote by Congress on increasing the debt ceiling, Treasury Secretary Timothy F. Geithner said in a letter Wednesday to congressional leaders.
Under normal circumstances, the federal government would reach its statutory debt limit on Dec. 31, Geithner said. However, the Treasury Department can take certain steps authorized by law, such as suspending investments in a federal employee retirement fund, to extend its borrowing authority for a short-term period.
Normally a tough vote for the majority party in both chambers of Congress, lifting the debt ceiling has become even more of a hot-button political issue in recent years, as Republicans have demanded large spending cuts in exchange for voting for the measure.
It has been anticipated for some months that a vote to increase the debt ceiling would have to take place in early 2013 if Congress could not address the issue before then. The need to raise the debt ceiling triggered the makeshift agreement in August 2011 that led to the automatic spending cuts that along with a range of expiring tax cuts make up the fiscal cliff.
The showdown last year almost led to a shutdown of the government and rattled financial markets because of the prospect that some lawmakers would rather default on U.S. financial obligations than authorize an increase in the debt ceiling.
In his letter to congressional leaders, Geithner noted there is considerable uncertainty about how long Treasury could extend the deadline for action. Typically, the steps taken by the department could allow it to borrow an additional $200 billion and delay a needed vote for two months, Geithner said.
“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,” he wrote. “At this time, the extent to which the upcoming tax filing season will be delayed as a result of these unresolved policy questions is also uncertain. 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.”
The IRS has not updated tax tables that would change with the expiration of various tax cuts and tax planners say it would take a couple of weeks for employers to catch up to new guidance.
Some lawmakers already are suggesting that a new deal on fiscal cliff issues could come in January, which would further complicate the federal tax situation.
In their talks over a larger deficit reduction agreement, President Barack Obama and House John A. Boehner, R-Ohio, discussed extending the government’s borrowing authority for at least a year. After those discussions reached an impasse, Obama suggested last week that Congress could pass legislation that would prevent large tax increases on low- and middle-income earners and head off automatic spending cuts at the start of 2013, but he did not make lifting the federal debt limit part of that package and so it does not appear that Congress would increase the debt ceiling in such a bill.