Geithner: Deadline to raise U.S. debt ceiling pushed to Aug. 2

I hope our elected officials were listening to us while they were on vacation.  I also hope that we will not allow ourselves to be distracted from some of the real issues that are facing our elected officials.  We need to make sure that we are paying attention to how they plan on lowering the deficit to ensure that it is a shared experience.

Treasury Secretary Timothy F. Geithner said on Monday that he will begin to undertake emergency measures this week to avert a potential default on the federal debt.

At the same time, he said, the United States now has until Aug. 2 to raise the legal limit on federal borrowing, 25 days longer than he had estimated last month. The reprieve is largely the result of higher tax revenues than anticipated.

In a letter to Congress, the Treasury secretary renewed his warning that a failure to raise the $14.3 trillion debt limit “would have a catastrophic economic impact.” But he also acknowledged that it could take weeks for Congress to vote to do so.

Lawmakers on both sides of the aisle are demanding that any increase in the debt limit be accompanied by concrete steps to slow the growth of the debt. But there is much disagreement on how to accomplish that.

President Obama and Geithner have called for a vote on the debt limit that is not linked to any actions. Some congressional Democrats favor a trigger that would cut spending and raise taxes if budget goals are not met within a few years. Many Republicans favor hard caps on spending and don’t want to raise taxes at all.

But Geithner dismissed the idea of linking the debate over the nation’s long-term fiscal picture to the debt limit.

“Contrary to common misperception, the debt limit has never served as a constraint on future spending, nor would refusing to increase the debt limit reduce the obligations the country has incurred,” he wrote in his letter.

The government is set to breach the debt limit officially in the middle of this month, on May 16, but the emergency measures Geithner is taking starting Friday will postpone a potential default until the beginning of August.

The measures include a suspension of a Treasury program that helps state and local governments manage their debts, and borrowing money from a pension fund from federal workers. The Treasury also could tap an emergency program used to deal with foreign financial crises.

A boost in tax revenues is providing a slight reprieve. In a separate release, the Treasury said Monday that between April and June it expects to borrow $142 billion, less than the $299 billion it expected in its last report.

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