Higher Debt Ceiling Sought

Treasury Secretary John Snow appears before the Senate Finance Committee on Capitol Hill Tuesday, Feb. 7, 2006, to discuss President Bush's FY2007 budget. Treasury Secretary John Snow and other top officials appeared at a series of congressional hearings to make the case that the administration was planning to fund programs that were working and eliminate those that were not.
AP
Treasury Secretary John Snow notified Congress on Monday that the administration has now taken "all prudent and legal actions," including tapping certain government retirement funds, to keep from hitting the $8.2 trillion national debt limit.

In a letter to Congress, Snow urged lawmakers to pass a new debt ceiling immediately to avoid the first-ever U.S. default on its obligations.

"I know that you share the president's and my commitment to maintaining the full faith and credit of the U.S. government," Snow said in his letter to leaders in the House and Senate.

Treasury officials, briefing congressional aides last week, said that during the week of March 20, the government will run out of maneuvering room to keep from exceeding the current limit.

In his letter, Snow notified lawmakers that Treasury would begin tapping the Civil Service Retirement and Disability Fund, which Treasury officials said would provide a "few billion" dollars in extra borrowing ability.

Treasury officials also announced that on Friday they had used the $15 billion in the Exchange Stabilization Fund, a reserve that the Treasury secretary has that is normally used to smooth out volatile movements in the value of the dollar in currency markets.

Treasury has also been taking investments out of a $65.3 billion government pension fund known as the G-fund.

Officials have said that once the debt limit is raised, the investments taken out of the pension funds would be replaced and any lost interest payments would be made up. The formal title for the G-fund is the Government Securities Investment Fund of the Federal Employees Retirement System.

Democrats hope to use the upcoming congressional debate over raising the debt limit to highlight what they see as the failings of the administration's economic program with its emphasis on sweeping tax cuts.

An actual default on the debt, a situation when the government misses making payments to current bondholders, is a doomsday scenario considered highly unlikely given what it would do to the government's credit rating.

It is expected that after intense debate, Congress will approve an increase in the current $8.18 trillion debt limit by perhaps $781 billion.

The administration has sent Congress a budget that on paper would cut the deficit in half by 2009, the year President Bush leaves office.