Martin Crutsinger, AP Economics Writer, On Thursday January 27, 2011, 9:57 am
WASHINGTON (AP) -- The U.S. government said Thursday it will alter its borrowing strategy to buy some time before hitting the $14.3 trillion debt ceiling.
Treasury officials said that starting next week they will gradually decrease the $200 billion the government has borrowed in a special program conducted for the Federal Reserve, lowering that amount to around $5 billion.
That will provide the government with an extra $195 billion that it can devote to its regular borrowing needs.
Treasury Secretary Timothy Geithner said in a Jan. 6 letter that the government will reach its current borrowing limit between March 31 and May 16, and that it was critical for Congress to raise that limit.
But Republicans are demanding cuts in spending before they will agree to raising the debt limit.
The government is currently $279 billion below the limit. Treasury officials said that the actions announced Thursday had been contemplated when Geithner made his estimate earlier this month.
They said that other actions will be taken in coming weeks but that they still expected the limit to be hit in the time frame laid out in the letter.
Geithner warned in his letter to congressional leaders that a failure to raise the debt limit would mean the government would not be able to make current debt payments. That would lead to an unprecedented default on the national debt.
A failure by the government to meet its debt obligations would drive up the government's borrowing costs and also raise borrowing costs for private U.S. companies and consumers.