O'Neill to inform Congress debt ceiling will be hit during legislative recess
Treasury Secretary Paul O'Neill is sending a letter to Congress warning that extraordinary measures will be needed to prevent a federal debt default during the Congressional recess if the legislature does not act.
Treasury "may have to take extraordinary actions" to stay within the debt ceiling during the recess, which starts Friday, he will explain in the letter, said Treasury spokesman Michele Davis in a press briefing.
The 5.950 trln usd debt ceiling is "likely" to be hit during the two-week recess if Congress does not approve an increase, she said.
The Treasury concluded that it was obligated to inform Congress through the letter, which will be released later today, she explained.
If Congress does not act, Davis said Treasury has a number of available measures to stay within the limit, as used by former Treasury Secretary Robert Rubin in 1995 during the last effort to get legislative clearance of an increase.
O'Neill's letter will not spell out these measures, however, she added.
These include allowing federal government pension and Social Security trust funds to go unfunded. These funds usually purchase special Treasury securities, but allowing them to go unfunded would leave Treasury extra room to issue debt to the public.
The Treasury said last month it could also cancel issues of non-marketable securities, such as Patriot bonds.
Last Thursday, the federal debt stood at 5.932 trln usd. The Treasury last year asked for a $750 billion increase in the ceiling, but members of Congress could not agree on how to advance the measure.
While House Republicans have favored attaching it to a supplemental defense spending bill to widen support for the measure. Meanwhile, the Senate Democratic leadership has called for a separate bill to consider the increase.
