Treasury Girds for Debt-Ceiling Fight

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http://online.wsj.com/article/SB125270970074004941.html


The Obama administration, concerned about the possibility of a big political fight over the national debt, is looking at how it can continue funding the government in the event that Congress hinders its ability to borrow money.

Treasury Department officials are examining tools employed by previous administrations, including disinvesting government retirement funds and suspending interest payments to federal accounts, according to people familiar with the matter. They are also looking at what to do in the unlikely event of a government shutdown.

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Associated Press

The Lincoln Memorial in Washington, shown on Dec. 16, 1995, when a partial federal government shutdown caused the temporary closure of visitor services at the monument.
.At issue is the debt ceiling, a dollar limit controlled by Congress that dictates how much the U.S. can borrow. Treasury Secretary Timothy Geithner told the Senate in a letter last month that the $12.1 trillion ceiling could be hit as early as mid-October, and said it needs to be increased so the U.S. can continue funding operations and making debt payments. Mr. Geithner didn't indicate the increase he was seeking.

With the U.S. borrowing about $30 billion a week, some economists say the Treasury will need an increase of as much as $1.5 trillion if it wants to avoid another request before the 2010 midterm elections. The U.S. could default on its debt if Congress doesn't raise the debt ceiling, but it is a remote scenario.

Bernanke: start work now to curb budget deficit

http://finance.yahoo.com/news/Bernan...sset=&ccode =

Oh NOW Ben is worried lol.

Federal Reserve Chairman Ben Bernanke is urging Congress and the Obama administration to start plotting a strategy to curb record-high U.S. budget deficits. Failing to do so could eventually erode investor confidence and endanger the economy's prospects for long-term health, he said.

Bernanke's comments, before the House Budget Committee on Wednesday, come as concerns grow at home and overseas about the United States' mounting red ink.

"Even as we take steps to address the recession and threats to financial stability, maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance," Bernanke said.

The White House estimates that the government will rack up an unprecedented $1.8 trillion budget deficit this year. That would be more than four times last year's all-time high.

The recession has taken a bite out of tax revenues paid by people and companies. At the same time, the government's spending has risen, paying billions to shore up banks, help the unemployed and others hurt by the downturn, the longest since World War II.

Bernanke said that such forceful government intervention to fight the worst financial crisis since the 1930s and lift the U.S. out of recession was "necessary and appropriate" even though it worsened the nation's budget deficit.

Bernanke acknowledged that Congress and the administration face "formidable near-term challenges" that must be addressed as they take steps to stabilize the financial system, reduce home foreclosures and spur banks to lend more freely. The success of these efforts will be crucial to turning the economy around