WASHINGTON – Expecting to reach the national debt ceiling of $6.4 trillion on Thursday, the government took steps Wednesday to allow federal borrowing to continue while Congress considers raising the debt limit.
Treasury Secretary John Snow wrote congressional leaders urging quick action to raise the ceiling, though he did not recommend a new limit. Treasury officials saying they wanted to leave that decision up to lawmakers.
"I know that you share the president's and my commitment to maintaining the full faith and credit of the U.S. government, especially at this critical time," Snow said in the letter.
"Together we must continue working to enact an increase in the statutory debt limit as quickly as possible to avoid any negative repercussions at home or abroad," Snow said.
Snow's request will set off a fresh debate in Congress that could last for weeks. In the meantime, Treasury Department will use a variety of techniques to keep government borrowing within the debt limit so the United States is not forced to default on any of its debt obligations, something that has never occurred before.
Republicans will push to approve the Bush administration's request for a higher debt limit. Democrats are certain to use that request as a chance to criticize President Bush's tax cut policies, which they contend have led to record budget deficits and the need for a higher debt limit.
Snow said the administration would begin making room for normal borrowing by not fully investing in the Government Securities Investment Fund, often called the G-fund.
This fund, which totals $48 billion, is used by the government to credit earnings for federal employees' pensions.
Snow stressed in the letter that any investments taken out of the G-fund to make room for other government borrowing would be replaced with interest earnings once Congress passes a new debt ceiling.
The last increase in the debt ceiling came in June when Congress increased the old limit of $5.95 trillion to $6.4 trillion, an increase of $450 billion.
The administration had sought an increase of $750 billion, hoping to avoid a second battle so soon in the new Congress.
This time, Brian Roseboro, Treasury's assistant secretary for financial management, said the administration had decided not to ask for a specific amount for the increase.
In testimony last week, Federal Reserve Chairman Alan Greenspan said Congress should consider doing away with the debt limit, saying it "has never in my judgment been successful in doing what it is supposed to have been doing, namely constrain spending."
While the debate over the debt limit often grows intense, as a practical matter Congress is unlikely to allow government finances to reach a point where there would be the possibility of an actual default on any part of the national debt, given the effect on the credit rating of the United States.
Treasury securities are considered the world's safest investment because of the record of the United States in meeting its debt obligations.
The national debt subject to limit stood at $6.392 trillion as of Tuesday, only $8 billion below the $6.4 trillion limit.