The United States may hit the legal limit on its ability to borrow by March 31 and faces serious consequences unless Congress acts by then to raise it, Treasury Secretary Timothy Geithner said on Thursday.
Even a short-term or limited default would have catastrophic economic consequences that would last for decades,” Geithner said in a letter to U.S. Senate Majority leader Harry Reid that was issued by Treasury.
Geithner said it was hard to pin down exactly when the current $14.3 trillion ceiling on the debt limit would be pierced but urged Congress to act before the end of the first quarter to avoid the risk of pushing the United States into default.
At a briefing later, a U.S. Treasury official urged lawmakers preparing for a new budget, and a likely fractious debate over spending, not to mix up the debt-limit issue with calls for greater restraint in government spending.
CONFIDENT CONGRESS TO ACT
The official, who spoke on condition of anonymity, expressed confidence that Congress will raise the debt limit if only because not doing so would have such a damaging impact.
“Our view is this needs to get done, it will get done,” the official said.
Exactly when the existing debt ceiling, which was approved only last February, will be pierced is not certain, but Treasury said it was looming.
“The Treasury department now estimates that the debt limit will be reached as early as March 31, 2011, and most likely between that date and May 16, 2011,” Geithner wrote.
He said Treasury could engage in extraordinary measures, such as suspending sales of state and local government securities and thus delay the date by which the debt limit is reached “by several weeks” but preferred not to do so.
“Once these steps have been taken, no remaining legal and prudent measures would be available to create additional headroom under the debt limit, and the United States would begin to default on its obligations,” Geithner said.
If that happened, Geithner said, there would be consequences for the U.S. economy “potentially much more harmful than the effects of the financial crisis of 2008 and 2009.”
The U.S. Treasury official said the department expected Congress to “do the responsible thing” and to lift the debt limit so that the United States can keep borrowing to fund its daily operating needs.
By David Lawder and Glenn Somerville
(Editing by Padraic Cassidy)
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Jim has worked as a Portfolio Manager & Financial Advisor since 1996. In May 2005, Jim founded WHI Financial Services, LLC, WHIFinancial.com, a Registered Investment Advisory firm, with headquarters in Texas. His primary focus is on portfolio management, financial & retirement planning, and financial advisory & insurance services. Jim manages investment portfolios & advises individuals, small to mid-size companies, and non-profit organizations on a variety of financial and business issues.
Prior to founding WHI Financial Services, LLC, Jim worked as a portfolio manager & financial advisor for two international investment firms. From 2001 to 2005, Jim worked with Prudential Securities (merger with Wachovia Securities, now Wells Fargo Financial Advisors), and from 1996 to 2001, he was working with Merrill Lynch. While working with both Wachovia Securities and Merrill Lynch, Jim enjoyed dual responsibilities as a portfolio manager, financial advisor and leader of the Professional Development Program.
Jim's responsibilities as leader of the Professional Development Program included, recruiting, interviewing, training, and overseeing the daily operations of all financial advisors involved in the Professional Development Program. Jim was responsible for managing between 10-20 advisors, while still managing his own client investment accounts.
In addition to his experience in the financial services area, Jim has been involved in several start-up companies. Jim's Philanthropic work includes serving as President/Treasurer of a private foundation established to provide non-profit organizations financial assistance, and Chairman/President of the Believe In Your Dreams Foundation. In 2007, Jim established the Believe In Your Dreams Foundation, a 501(c)3 organization, to help individuals who are suffering from life-altering circumstances beyond their control.
Jim has taught investment, insurance, and credit repair classes through continuing education at universities in CA & TX since 1997. Jim attended the University of Minnesota where his focus was Management & Marketing.
Jim has recently written two books, one called "Your Financial Lifecycle" a book which describes several key investment topics everyone will face throughout their life, and a book titled, "The Truth about Your Credit Score", which defines how credit scores are calculated and how you can increase your credit score, including templates which you can use to send to creditors.
Jim's books can be purchased on Amazon.com, via Author search, or by emailing him directly at JimWigen@GetWealthyStayWealthy.com.
In the Fall of 2011, Jim will be starting his radio show called, The Jim Wigen Show, Teaching You to Get Wealthy & Stay Wealthy. You can hear his shows through streaming audio by visiting JimWigen.com.
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