Snow urges raising US debt ceiling

August 03, 2004|Associated Press

WASHINGTON -- The United States could face the prospect of not being able to pay its bills this fall unless Congress raises government borrowing authority now capped at $7.4 trillion, Treasury Secretary John Snow said yesterday.

In a letter to House and Senate members, Snow said the government is expected to reach the current statutory ceiling on the national debt by late September or early October.

Even if Treasury takes steps to juggle accounts to stay just under the limit to avoid defaulting on the debt, "we can finance government operations no longer than mid-to-late November," Snow wrote. The government has performed such maneuvers in the past.

He urged Congress to raise the debt limit as soon as possible. But, he did not suggest a specific amount.

Economists doubt Congress will reject Snow's call. A federal default is considered unimaginable because it would rattle bond markets and force interest rates higher.

Democrats cite the government's need to boost the debt limit as evidence that President Bush is mishandling the economy. The administration says fighting terrorism at home and abroad is among the reasons government borrowing has gone up.

The government expects to tap $89 billion from credit markets this quarter, slightly less than an earlier estimate because of higher than expected revenues, the Treasury Department said in a separate report.

Treasury needs to borrow to finance the daily operation of the government, including meeting interest payments on the national debt, which now stands at nearly $7.3 trillion.

The White House last week said it expected this year's federal budget deficit to clock in at $445 billion -- less red ink than it estimated earlier this year. The Congressional Budget Office is predicting a $477 billion deficit. In any case, the deficit would be a record in dollar terms.