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

Netscape via Reuters ^ | July 14, 2004

[jd777]

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.

© Copyright Reuters Ltd. All rights reserved. The information contained In this news report may not be published, broadcast or otherwise distributed without the prior written authority of Reuters Ltd.

07/14/2004 17:48 RTR

[undeniable logic]

I know that the major portion of the debt is due to funding the war on terror - so I don't like to complain at a time like this, but I hate to see the debt continue to rack up. I wish they would start to cut spending up in DC.

[Willie Green]

Federal Budget Deficit balloons to $326.6 billion so far in 2004

I place economy among the first and most important virtues, and public debt as the greatest of dangers to be feared. To preserve our independence, we must not let our rulers load us with perpetual debt. If we run into such debts, we must be taxed in our meat and drink, in our necessities and in our comforts, in our labor and in our amusements. If we can prevent the government from wasting the labor of the people, under the pretense of caring for them, they will be happy.

~ Thomas Jefferson

[Willie Green]

"I am one of those who do not believe that a national debt is a national blessing, but rather a curse to a republic; inasmuch as it is calculated to raise around the administration a moneyed aristocracy dangerous to the liberties of the country."

-- President Andrew Jackson - (1824)

[meenie]

LBJ ran the US economy into the wall by the Vietnam war and entitlement increases. History repeats itself.

[GretchenM]

We need a GOP Congress that will get brutal with the results of 40 years of Democrats controlling both Houses -- and cut the bloat.

[endthematrix]

Lost message to Congress:

STOP SPENDING THE MONEY!

[reformedliberal]

So did FDR. His debt was 130% of then-GDP to pay for the war effort AND the New Deal.

The debt is funded by 30-year bonds. The bonds from 1942 and 1968 have been retired. Our present debt ratio is 3.1% of GDP.


http://www.freerepublic.com/focus/f-news/1171083/posts
U.S. posts higher-than-expected June budget surplus
Reuters ^ | Tue Jul 13, 2004 | Laura MacInnis


http://www.freerepublic.com/focus/f-news/1129124/posts
Federal Deficit Likely to Narrow By $100 Billion
Washington Post ^ | May 4, 2004 | Jonathan Weisman

Note both articles are from mainstream sources.

[meenie]

Thirty year bonds should have been paid and retired up until thirty years before 2004 or those issued up until 1974. 3.1% of a seven trillion GDP would be 217 billion dollars. That might pay the interest on the debt for a year. The 130% of GDP in the FDR adminstration is approximately what our debt is now without any future obligations considered. Medicare and SS payments are eating our lunch compared to the FDR era.

The June item in Reuters was 100 billion less but still 400 billion plus for the forecast budget year. An item that is never mentioned among elite people is the fact that our trade deficit is financed through the Federal Reserve just as our government funding is done. This dilutes the value of our money just as our government spending does. There is no free lunch in government spending and/or trade spending. If you don't pay now, you pay later. It is as simple as that.