WASHINGTON – Treasury Department debt managers intend to soon carry out an accounting maneuver that would free billions of dollars on paper to prevent the government from breaching the $6.4 trillion ceiling on the national debt.
The step, announced Friday, is the latest in a series of moves Treasury has taken to prevent the government from defaulting on the national debt.
Treasury is maneuvering because it has run out of room in its statutory authority to borrow. It has asked Congress to boost the government borrowing authority, a matter still pending on Capitol Hill.
Treasury Secretary John Snow, in a letter Friday to House and Senate leaders of both parties, notified them that the department will - on paper - suspend new investments in Treasury securities that would be credited to the Civil Service Retirement and Disability Fund.
"Beneficiaries will be fully protected and will suffer no adverse consequences," Snow wrote in the letter.
Snow said the action could begin as early as Friday -- but no later than next Friday -- and will last until July 11. Treasury said the maneuver would free up around $12 billion that along with previous maneuvers will allow the government to continue to pay its bills.
Brian Roseboro, Treasury's assistant secretary of financial markets, said all the accounting juggling that has been going on since February will in no way slow tax refund checks that will be flowing to Americans.
Roseboro said the action announced Friday increases the likelihood that the government will be able to pay its bills through April 15, when an inflow of income tax payments should boost the government's cash on hand.
But given the sagging economy -- which has taken a bite out of income tax payments collected by the government -- Roseboro said it is difficult to predict what tax receipts would total and how long they would be able to help the government through its borrowing constraints.
Last year, Congress boosted the old debt limit by $450 billion, from $5.95 trillion to the current $6.4 trillion.
However, at that time Treasury warned that Congress would need to again increase the government's borrowing authority.
Boosting the debt limit is more a matter of politics than economics.
Economists doubt Congress will refuse to raise the limit. A federal default is considered unimaginable because it would rattle bond markets, force interest rates higher, weaken the world economy and deliver a political blow to President Bush.
Democrats point to the government's need to borrow more to ridicule President Bush's tax cuts and his handling of the economy.
Republicans blame the lingering effects of the 2001 recession and the costs of fighting terrorism for the need to extend the debt limit. Republicans have been trying to avoid a direct vote on raising the debt ceiling because it focuses attention on the huge run-up of federal deficits in the last two years.