United States Hits Debt Ceiling
May 16, 2011
Today, Secretary of the U.S. Treasury Timothy Geithner announced that the United States has hit the $14.3 trillion statutory debt limit. In a letter to Congress, Geithner stated, “Treasury – to avoid breaching the statutory debt limit—will suspend additional investments of amounts credited to, and redeem a portion of the investments held by the Civil Service Retirement and Disability Fund (CSRDF), and will suspend investment of the Government Securities Investment Fund (G Fund) of the Federal Employees' Retirement System.” The letter can be viewed here.
Geithner, in a previous letter to Sen. Michael Bennett (D-Col.) dated May 13, 2011, stated, “A default would inflict catastrophic, far-reaching damage on our nation's economy, significantly reducing growth, and increasing unemployment." Just last week, Federal Reserve Chairman Ben Bernanke also urged Congress to be aware of the potential consequences for failing to increase the debt limit, indicating that the worst outcome may resemble the destabilization of the financial system and resulting economic strain, experienced in 2008.
While the debt limit was hit today, Geithner has stated that his shuffling of funds will extend the drop-dead default date until Aug. 20, 2011.
Meanwhile, in Congress, Republicans and Democrats continue to negotiate on what it will take to raise the debt limit. Republicans have continued to propose spending cuts in exchange for a vote to increase the debt limit. Many Democrats have indicated that tax revenues must also be included, yet Republican leadership contends that tax increases should not be on the table.
Staff in FEI’s Washington, D.C., office has been actively monitoring this issue and will continue to track progress and keep members up-to-date as the Aug. 2 date approaches.
Prepared May 16, 2011 by Tyler Roberts (firstname.lastname@example.org), policy analyst, Government Affairs, Financial Executives International. This summary does not represent FEI opinion specifically noted above.