Washington – Treasury Secretary Henry Paulson told Congress on Wednesday that the government will hit the current debt ceiling Oct. 1.
He sought quick action to increase the limit, saying it was essential to protect the “full faith and credit” of the country, especially at a time of financial market turmoil.
The limit is $8.965 trillion. Unless Congress votes to raise it, the country would be unable to borrow more money to keep the government operating and to pay debt obligations coming due.
The United States has never defaulted on a debt payment, but the decision on whether to raise the debt ceiling often means a prolonged battle in Congress.
Paulson wrote congressional leaders that according to data now available, the Treasury expects to reach the ceiling Oct. 1 – the first day of the new budget year.
That projection does not take into account moves the government often has to use, such as withdrawing investments from certain trust funds to create room for extra borrowing until Congress approves a debt increase.
This month, the Senate Finance Committee approved increasing the limit on the debt to $9.82 trillion. That boost of $850 billion would be the fifth since President Bush took office in 2001.
The House approved an increase in May. The full Senate has not acted yet.
“The full faith and credit of the United States, to which we all remain committed, is a national asset and a cornerstone of the global financial system,” Paulson wrote. “In light of current developments in financial markets, which would be exacerbated by uncertainty in the Treasuries market, I urge the Senate to pass the legislation reported by the Finance Committee to increase the debt limit as soon as possible.”
