Paulson says Treasury to hit debt limit in October
http://today.reuters.com/news/articl...T-UPDATE-1.XML
Mon Jul 30, 2007 4:08pm ET
WASHINGTON, July 30 (Reuters) - U.S. Treasury Secretary Henry Paulson said on Monday the government will hit an $8.965-trillion ceiling on its ability to borrow in early October and asked Congress to raise it.
"The actions that are available to the Treasury department to take in order to avoid breaching the statutory debt limit would create unnecessary uncertainty for the financial markets and result in costs to the government," Paulson said in a letter sent to Senate Majority Leader Harry Reid and made public by the Treasury.
"These actions should be reserved only for extraordinary circumstances, and should be avoided," Paulson said.
The U.S. debt limit is set by statute, so the Treasury has to seek Congress' approval for an increase. With both houses of Congress now under Democratic control, the request likely sets the stage for a debate about the Bush administration's management of the economy and of the national debt.
The debt limit was last raised in mid-March of 2006, a $781-billion increase that took it to its current level. That was the fourth time that it had been raised since 2002 and it came after lengthy wrangling.
In theory, if Congress refused to raise the debt limit, it could trigger a debt default if the government was unable to repay money that it borrows by selling securities.
But that has never happened in U.S. history and, in practice, the Treasury can stave off breaching the limit through a variety of maneuvers like suspending some sales if lawmakers get into an extended debate about increasing the debt limit.
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