US Treasury Secretary Timothy Geithner
Source: Press TV
The US reached the statutory debt limit as it ran into its USD 14.29 trillion ceiling on borrowings, Treasury Secretary Timothy Geithner has warned.
Geithner said in a letter to US Senate leader Harry Reid on Monday that the country was initiating a "debt issuance suspension period" to keep from going over it, AFP reported.
The US Treasury secretary urged Congress to raise the ceiling "in order to protect the full faith and credit of the United States and avoid catastrophic consequences for citizens."
He said to avoid topping the ceiling, the government would halt the automatic cycling of civil service pension funds into US Treasury debt, the way they are traditionally stored.
The move will give the Treasury about USD 224 billion of headroom as it meets an estimated USD 120 billion a month in net new borrowing needs to cover the government's mounting budget deficit.
However, by August 2, according to Treasury projections, spending requirements will exhaust the temporary measures and the government will have to either slash spending on existing obligations or possibly default on its debts.
US President Barack Obama warned on Sunday that the country may plunge back into recession unless a standoff over the country's debt ceiling is resolved and the government defaults on its loans.
Meanwhile, White House spokesman Jay Carney said on Monday not raising the US debt limit would have very serious consequences and those who suggest the opposite are “whistling past the graveyard.”