WASHINGTON – 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 nation's first-ever 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 the government will run out of maneuvering room to keep from exceeding the current limit sometime during the week of March 20.
Snow in his letter 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 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.
Sen. Max Baucus, D-Mont., said last week that under President Bush the total of the deficits has increased by $3 trillion, a 40 percent increase from where the national debt — the total of previous deficits — stood when Bush took office in January 2001.