The U.S. is about to hit the debt limit (again)

Gregory Korte | USA TODAY

WASHINGTON — Treasury Secretary Jacob Lew told Congress on Friday that he'll once again have to take measures to keep the federal government under the legal debt limit after a suspension of the limit expires Sunday.

Beginning Monday, Lew said the Treasury Department will take "extraordinary measures" to keep the government from defaulting on its debt. Those include a halt to new investments in federal employee pension funds, a moratorium on deposits from state and local governments, and drawing down a $23 billion currency stabilization fund.

Lew did not say how long those measures would last. But the Bipartisan Policy Center, which tracks the finances underlying the national debt, estimates that the government will run out of borrowing ability completely sometime between Oct. 1 and Dec. 31.

Since 1917, Congress has set an overall limit, or debt ceiling, to the amount that the Treasury can borrow. But after a number of high-stakes battles over raising the debt limit in recent years, Congress simply suspended the law.

The latest suspension expires Sunday, resetting the new debt limit at the current level of about $18.1 trillion.

The Treasury Department may have more room to maneuver this time compared to previous debt limit crises. The Civil Service Retirement and Disability Fund, a pension fund for federal employees, will receive $46 billion on June 30 when an investment matures. Treasury will take that money to pay for current expenses, essentially borrowing from the federal pension plan.

By law, those funds must be replaced when the debt limit is increased.

The Treasury Department explained its measures in a five-page document sent to Congress with Lew's letter. In it, the department specifically ruled out other alternatives — like selling off government assets to stay under the debt limit.

"Selling the nation's gold to meet payment obligations would undercut confidence in the United States both here and abroad, and would be extremely destabilizing to the world financial system," the Treasury Department said. Also ruled out: Selling the remainder of Treasury stock in institutions bailed out during the financial crisis, or selling its portfolio of student loans.

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