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Hill gets wiggle room on debt limit

- Associated Press - Monday, May 2, 2011

Treasury Secretary Timothy F. Geithner is giving Congress a little more breathing room to negotiate a deal that would raise the nation's borrowing limit.

In a new letter to congressional leaders, Mr. Geithner said Monday that he can delay an unprecedented default on the debt until Aug. 2, using a series of bookkeeping maneuvers to keep the government running. That's nearly a month longer than the July 8 deadline Mr. Geithner had previously cited.

The U.S. government will hit its $14.3 trillion borrowing limit on May 16. After that time, Mr. Geithner can take such steps as removing investments from government employee and retiree pension funds to keep from going over the limit.

Republicans have said they will not vote to raise the debt limit until it reaches an agreement with the White House on further spending cuts.

The debt subject to limit stood at $14.24 trillion as of last Friday, $58.1 billion below the current limit. With Congress back from a two-week recess, negotiations are expected to begin in earnest this week on the debt limit.

Mr. Geithner said he will begin making moves on Friday to delay a default. At that time, the government will stop selling Treasury securities used by state and local governments to support their own sales of tax-exempt bonds. Treasury has suspended such sales six times over the past two decades, all in conjunction with previous debt fights. The most recent such suspension was in 2007.

The Treasury Department also announced Monday that it plans to sell $156 billion in debt during the current April-June quarter. It will be able to achieve those sales with the amount of room that still exists under the debt limit and the extra room made through Mr. Geithner's maneuvers.

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