WASHINGTON – The Bush administration told Congress on Thursday it had begun to use a government pension fund to keep from hitting the $8 trillion debt limit.
Treasury Secretary John Snow warned in a letter to congressional leaders that he would run out of room to make such maneuvers in about four weeks, meaning the government would lose the ability to meet its obligations unless Congress had raised the borrowing limit by then.
As of Tuesday, the government's borrowing subject to the limit stood $38.8 billion below the current debt limit of $8.184 trillion.
In his letter, Snow said Treasury would begin taking investments out of a $65.3 billion government employee pension fund called the G-fund.
By withdrawing investments, Treasury is making room on the government's books for increased borrowing.
Snow said he is utilizing a maneuver that has been employed by other Treasury secretaries during times when the government's borrowing levels were approaching the debt limit. Without the action, the debt limit would have been reached on Thursday, said Treasury spokeswoman Brookly McLaughlin.
Snow said once the debt limit was raised, he would make the employee pension fund whole, putting back the investments that had been withdrawn and making up any lost interest payments. The fund's formal title is the Government Securities Investment Fund of the Federal Employees Retirement System.
Treasury has other bookkeeping maneuvers that can be used and they announced that as of Thursday they suspend sales of debt securities to state and local governments.
Treasury officials said they did not expect auctions of debt to the public to be disrupted as long as Congress acts soon to raise the debt limit.
While Congress is expected to raise the debt limit, Democrats hope to use the upcoming debate to highlight what they contend are the failures of the administration's economic policies.
The administration sent Congress a budget last week that on paper would cut the deficit in half by 2009, the year President Bush leaves office.
But Democrats contend the administration met its deficit-reduction goal only by leaving out major spending items such as the full costs of the Iraq war. They say the deficit will not improve unless Bush abandons his effort to make his first-term tax cuts permanent.
Rep. Charles Rangel of New York, the top Democrat on the Ways and Means Committee, said Snow's announcement Thursday "is proof positive that deficits do matter and that Republican leadership needs to take action."
The last time Congress voted to increase the debt limit was in November 2004 when it was raised from $7.38 trillion to its current level of $8.18 trillion.
The administration has not said how much of a boost should be made in the current limit, but the expectation is that Congress will probably end up raising the debt limit by around $800 billion.