Treasury pushes deadline for raising the debt ceiling to August

The Treasury Department on Monday said it has extended the deadline for raising the federal debt ceiling to Aug. 2.

Treasury said it is beginning extraordinary maneuvers to keep the U.S. out of default in anticipation of Congress not raising the debt ceiling before it is breached on May 16. 

{mosads}Treasury Secretary Timothy Geithner told congressional leaders of the moves in a letter Monday.

He said that the actions will allow Treasury to extend its borrowing authority to Aug. 2. Last month, Geithner had estimated that Treasury could only stave off default only until July 8.

The change in the date gives Congress more time to negotiate a solution to the standoff over the $14.3 trillion debt ceiling. Most Democrats want a clean $2 trillion increase in the ceiling, while Republicans and Democratic fiscal hawks want the bill tied to deficit-reduction measures. 

Congress is scheduled to break for its annual summer recess after August 5.

“Because it appears that Congress will not act by May 16, it will be necessary for the Treasury to begin implementing these extraordinary measures this week,” Geithner wrote.

He said that the extension of the deadline is largely due to stronger tax receipts than anticipated.

“While this updated estimate in theory gives Congress additional time to complete work on increasing the debt limit, I caution strongly against delaying action. The economy is still in the early stages of recovery, and financial markets here and around the world are watching the United States closely. Delaying action risks a loss of confidence and accompanying negative economic effects,” Geithner wrote.

He said parties should not use the debt limit increase as a “bargaining chip to advance partisan policy agendas.”

A spokesman for Speaker John Boehner (R-Ohio) said the debt ceiling increase still needs to be paired with fiscal reforms.

“This does not change the fact that the American people won’t tolerate an increase in the debt limit without meaningful cuts and spending reforms,” Michael Steel said in response to Geithner’s letter. 

In the first of a series of evasive moves, Treasury this week will suspend issuing state and local government Series securities. These securities help state and local governments manage their debts.

On May 16, if the debt ceiling is not raised, then Geithner will make changes to the way the Civil Service Retirement and Disability Fund and the federal Thrift Savings Plan handle investments in Treasury bonds, which would lower the total outstanding debt.

Updated at 4:52.