Debt ceiling will be hit by May 16, Geithner says

Geithner predicts the exact day that the U.S. would hit their debt ceiling. He also offered suggestions for delaying this event, but these suggestions would only be temporary and not a permanent solution.

By Greg Robb
MarketWatch
April 4, 2011

WASHINGTON (MarketWatch) — Treasury Secretary Timothy Geithner on Monday said the U.S. would hit the debt ceiling no later than May 16, a much more precise forecast than prior projections.

Last month, Treasury had said the U.S. would reach the $14.29 trillion ceiling between April 15 and May 31.

In a letter to Congressional leaders, Geithner said his estimate may change, but would probably be a shorter, not longer time frame. “We do not believe [the projections] are likely to change in a way that would give Congress more time in which to act,” Geithner said.

In his letter, the Treasury Secretary outlined various delaying tactics that he could take to delay hitting the limit.

But these temporary measures would only work for about eight weeks and the Treasury would run out of room to borrow around July 8, Geithner said.

The Obama administration has been urging Congress to raise the ceiling with no strings attached.

Some in Congress, including Democratic Sen. Joe Manchin of West Virginia and Republican Sen. Marco Rubio of Florida, say they won’t vote to boost the debt ceiling unless there’s a corresponding plan to rein in the U.S. budget deficit.

Geithner said there was no way to avoid or delay a congressional vote.

“To attempt a “fire sale” of financial assets in an effort to buy time for Congress to act would be damaging to financial markets and the economy and would undermine confidence in the United States,” Geithner said.

It is also not possible to cut spending or raise taxes to avoid raising the debt limit because of the immediate need to cash.

“There is no alternative to enactment of an increase in the debt limit,” he said.

Federal Reserve Chairman Ben Bernanke has warned of financial chaos if the debt ceiling is not raised.

The view was echoed by Jamie Dimon, the chief executive of J.P. Morgan Chase & Co.

Greg Robb is a senior reporter for MarketWatch in Washington.

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