U.S. Treasury says likely to hit debt limit in Oct

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From today's Drudge Report:

U.S. Treasury says likely to hit debt limit in Oct

WASHINGTON, July 14 (Reuters) - The U.S. government will likely reach its federal debt limit in early October, a top Treasury official said in written remarks, giving fresh details on when the politically sensitive ceiling will need to be raised.

The $7.384 trillion debt limit may need attention before the November election, Timothy Bitsberger, Treasury's nominee for assistant secretary for financial markets, said in a document obtained by Reuters on Wednesday.

"It appears very likely the limit will be reached sometime in late September or October, with the most likely date being early October," Bitsberger said in the submission for the record after his Senate confirmation hearing last week.

"Treasury may be in a better position to narrow this range after completion of the mid-session review," he said in response to a question from Sen. Max Baucus of Montana, the ranking Democrat on the Senate Finance Committee.

CONTENTIOUS VOTE

The government's statutory debt was $7.220 trillion as of July 12, according to Treasury data.

Treasury Secretary John Snow has urged Congress to move speedily to raise the limit, in what is likely to be a contentious election-year vote on the country's rising debt. He has asked Congress to act before its August recess.

Democrats blame President George W. Bush's tax cuts for turning the fiscal surplus he inherited into a record deficit, which is expected to top $400 billion this year. The debt limit has already been raised twice during the Bush administration.

Lou Crandall, chief economist at Wrightson ICAP, said the potential timing of a vote on raising the debt limit, just before the November election, could worry markets.

"Congress doesn't want to have to deal with it, and the bond market doesn't want to see Congress have to deal with it," he said.

"The bond market at this point tends to take a pretty complacent approach to debt ceiling problems because they do tend to come and go with minimal disruption in the end," he said. "However it becomes a question that you would just rather not have hanging over the market."

Treasury has been reluctant to pinpoint exactly when the debt ceiling will be reached, with officials saying recently it could happen in "late summer or early fall."

In his remarks, Bitsberger said Treasury might be able to stretch the limit out until "early October to late November" if it were to use various accounting measures.

"While there is a chance the date will be reached after Election Day, we cannot predict this with absolute certainty in early July," he said.

"It is for this reason that Secretary Snow has publicly urged Congress to increase the debt limit as soon as possible, even before recessing in August."

Bitsberger's timeframe was likely a "worst-case" estimate, as budget deficit expectations have narrowed over the year, Crandall said.

In a research note on Monday, Crandall had said there was little danger that Treasury would run out of borrowing authority before the election, adding it wouldn't need to invoke extraordinary measures until December.


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07/14/2004 17:48
RTR