The U.S debt limit was reached on Monday hitting $14.294 trillion, meaning the U.S. Treasury will have to start dipping into federal pension funds in order to free up borrowing capacity.
U.S. Treasury Secretary Timothy Geithner said he would also suspend investments in two government retirement funds to enable more borrowing capacity by $147 billion. Geithner also told Congress the Treasury will issue $72 billion in bonds and notes.
These measures will only buy time for the U.S. government until August 2nd before it will start defaulting on its debt payments, mainly to bond investors.
Pressure is being laid on Congress to increase the debt ceiling. “I again urge Congress to act to increase the statutory debt limit as soon as possible,” Geithner pleaded.
Congress is responsible for increasing the debt ceiling, but Republicans are demanding deep cuts to federal spending for the price of their support in raising it.
“Federal retirees and employees will be unaffected by these actions,” Geithner said, since Treasury must make the funds whole once the debt limit is raised.
Congress has previously raised the debt limit, most recently during President Bush’s administration, when the Treasury suspended investments in 2006.