Warning US lawmakers that time is fast running out on the debt ceiling issue, Treasury Secretary Timothy Geithner has told the Congressional leadership that America could default by mid-February.
"If Congress does not act to extend borrowing authority, all of these payments would be at risk. This would impose severe economic hardship on millions of individuals and businesses across the country," Geithner said in a letter to the Congressional leadership yesterday.
The US had hit the $16.4 billion debt ceiling on December 31. Since then it has employed "extraordinary measures" to avoid any default, but it might end up mid-February if the debt limit is not increased, he said.
"Treasury currently expects to exhaust these extraordinary measures between mid-February and early March of this year. We will provide a more narrow range with a more targeted estimate at a later date," Geithner said.
Any estimate, however, will be subject to a significant amount of uncertainty because the US is entering the tax filing season when amounts and timing of tax payments and refunds are unpredictable, he said.
"For this reason, Congress should act as early as possible to extend normal borrowing authority in order to avoid the risk of default and any interruption in payments," he said.
"If the extraordinary measures were allowed to expire without an increase in borrowing authority, Treasury would be left to fund the government solely with the cash we have on hand on any given day.
"As you know, cash would not be adequate to meet existing obligations for any meaningful length of time because the government is currently operating at a deficit," he said in the letter.