U.S. to Hit Debt Ceiling Dec. 31 -- Happy New Year, Everyone
NEW YORK (TheStreet) -- Uncle Sam will hit his debt limit on New Year's Eve in another sign that the U.S. is lurching closer to the much-dreaded "fiscal cliff."
U.S. Treasury Secretary Timothy Geithner said in a letter to Senate Majority Leader Harry Reid (D, Nev.) on Wednesday that the federal government will reach its $16.394 trillion statutory debt limit on Dec. 31.
Geithner said the Treasury is planning "extraordinary measures" to postpone defaulting on $200 billion in bond payments and create some "headroom" for Washington beyond New Year's Day.
Those include suspending payments to several government employee-pension funds that are funded with U.S. bonds as well as halting ongoing foreign exchange stabilization programs where government debt is used as collateral.
"Under normal circumstances, that amount of headroom would last approximately two months," Geithner said in the letter, which was copied to leaders of both the House and Senate. "However, given the significant uncertainty that now exists with regard to unresolved tax and spending policies for 2013, it is not possible to predict the effective duration of these measures."
A major issue for Uncle Sam in paying off its debt is that the the Internal Revenue Service still does not know the fate of the Alternative Minimum Tax, a sticking point in fiscal-cliff negotiations. Without certainty around AMT -- as well as hundreds of other revenue boosts and spending cuts -- the federal government remains in financial limbo.
"At this time, the extent to which the upcoming tax filing season will be delayed as a result of these unresolved policy questions is also uncertain," the letter says. "If left unresolved, the expiring tax provisions and automatic spending cuts, as well as the attendant delays in filing of tax returns, would have the effect of adding some additional time to the duration of the extraordinary measures."
-- Written by Christopher Westfall in New York