US to reach debt limit by May 16: Treasury

“Default would cause a financial crisis potentially more severe than the crisis from which we are only now starting to recover,” Geithner said. He warned that military pay, social assistance payments and tax refunds could be among the first things to be blocked.

US Treasury Department said US likely to hit $14.29 trln debt limit sooner than thought © AFP/File Karen Bleier

AFP

WASHINGTON (AFP) – The United States is likely to hit its $14.29 trillion debt limit sooner than thought, the Treasury Department said Monday, pressuring lawmakers to raise the ceiling or face a possible government default.

“The Treasury Department now projects that the debt limit will be reached no later than May 16, 2011,” the Treasury said.

The department previously estimated it would hit the ceiling by May 31.

If it is not raised, the United States would only have weeks before it runs out of cash to pay its bills, according to government estimates.

“Increasing the limit is necessary to allow the United States to meet obligations that have been previously authorized and appropriated by Congress,” Secretary Timothy Geithner said in a letter to lawmakers.

He warned that military pay, social assistance payments and tax refunds could be among the first things to be blocked.

“Default would cause a financial crisis potentially more severe than the crisis from which we are only now starting to recover,” Geithner said.

The warning came as US lawmakers battle over how to cut spending and trim the budget deficit.

Although the issues of extending the debt ceiling and balancing the budget are not linked, they have become enmeshed thanks to Washington’s political deal-making.

The debt ceiling became a hot-button issue after Republicans took control of the US House of Representatives in early January, leaving Obama’s Democrats only in control of the Senate.

© AFP — Published at Activist Post with license