Geithner Tells Congress U.S. Reaches Debt Limit

Treasury Secretary Timothy F. Geithner told Congress that the U.S. hit its statutory debt limit, necessitating emergency steps announced last week as a way to keep funding the government and avoid default.

Geithner said he had issued a “debt issuance suspension period” for the Civil Service Retirement and Disability Fund, effective today and to last until Feb. 28, 2013. The letter said the Treasury was taking similar action for the Postal Service Retiree Health Benefits Fund.

“Federal retirees and employees will be unaffected by these actions,” according to Geithner’s letter. It said the funds “will be made whole” after Congress increases the debt limit.

Geithner said on Dec. 26 the department expected to hit the $16.4 trillion debt ceiling today, while various “extraordinary measures” he can take would create about $200 billion of “headroom” to avoid possible default.

Asked whether the U.S. debt limit was reached, a Treasury official responded by e-mail: “As Secretary Geithner laid out last week, we will reach the statutory debt limit today.”

Debt Limit

Republicans have attempted to use the need for a debt-limit increase to force deeper spending cuts, replicating the 2011 showdown that caused the U.S. to come within days of default and led to a credit-rating downgrade.

Congressional leaders were negotiating with President Barack Obama’s administration over ways to avoid more than $600 billion in spending cuts and tax increases scheduled to go into effect tomorrow. The U.S. House of Representatives doesn’t plan any votes on the federal budget tonight, meaning that Congress for now will fail to avert what is commonly referred to as the “fiscal cliff.”

To contact the reporters on this story: Kasia Klimasinska in Washington at kklimasinska@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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