GAO: Treasury has less wiggle room on debt limit

When the statutory limit has been hit in the past, the Treasury has been able to postpone adverse consequences by taking several steps, including suspending investments or temporarily disinvesting securities in federal employee retirement funds. Those moves have given Congress time to debate the debt limit before ultimately raising it, which has been done 12 times since 1995.

But the “extraordinary actions available to the Treasury have not kept pace with the growth in borrowing needs,” the GAO stated.

In other words, the amount of money the Treasury can raise with these extraordinary steps is being dwarfed by the growing amount of debt the government needs to meet ongoing obligations.

“As a result, once debt reaches the limit, Congress will likely have less time than in prior years to debate raising the debt limit before there are disruptions to government programs and services,” the GAO wrote in its report.

The fight over the debt limit has occupied Congress for months, since Treasury Secretary Timothy Geithner warned of “catastrophic economic consequences” if the limit is not raised before it is reached. The Treasury expects to hit the limit sometime in April or May.

Republicans are hoping to use the debt limit debate as leverage to get more spending cuts out of Congress, while the administration and Congressional Democrats are warning that the consequences of not raising the limit are too dire to be used for political gain.

Republicans have said they want to ultimately raise the limit but have dismissed Geithner’s warnings as scare tactics.