US Taps Pension Fund To Avoid Debt Limit Default
The day after Christmas, Treasury Secretary Timothy Geithner has informed congress that the government will reach its borrowing limit of $16.4 trillion on December 31, after which “extraordinary measures” will have to be taken in order to avoid the debt limit.
Yesterday, in a letter to congress he announced that the government had begun borrowing from the Federal Employee Pension Fund (the G Fund) to keep operating without surpassing the limit. The move he said, will free up $156 billion in borrowing authority while Congress debates increasing the $16.4 trillion debt limit.
Meanwhile the gridlock between the President and the House Republicans over increasing the debt limit persists; GOP standing firm on their decision not to raise it unless the President acquiesces to significant spending cuts.
Geithner has been warning the government for months that the borrowing limit would soon hit the $16.4 trillion debt ceiling — a legal limit on how much it can borrow.In his letter to the congressional leaders,Geithner said the Treasury expects to exhaust those measures by mid-February to early March.
The latest action has been taken by other Treasury Secretaries in the past and will not put in jeopardy any monthly pension payments. The measure won’t have an impact on retirees because the Treasury is legally required to replace the funds removed from the pension account after the borrowing limit is raised.
Photo Credit: Reuters