The administration has notified members of Congress that because they apparently will not raise the federal debt limit by May 16 – when the limit is expected to be reached -- the Treasury Department will begin implementing “extraordinary measures” to buy more time.
About a month ago, Treasury Secretary Tim Geithner estimated that such measures would enable his department to extend borrowing authority until about July 8. In a letter to congressional leaders on Monday, Geithner said stronger tax receipts had pushed the estimated date back to Aug. 2. But he still urged Congress to raise the debt limit soon.
The limit must be raised to avoid a government default, although Congress should use this "must pass" legislation as an opportunity to agree on procedural or substantive fiscal reforms. The longer lawmakers delay action, the greater the risk of turmoil in the financial markets triggered by investors' doubts about whether Washington will meet its financial obligations.
Geithner’s letter this week pointed out that under either the President’s proposed budget or the budget approved by House Republicans, the debt limit would need to be raised by roughly the same amount to fund the government through the next fiscal year.