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Dublin: 17 °C Thursday 28 August, 2014

US to stop pension payments as national debt reaches $14.3 TRILLION legal limit

Timothy Geithner tells Congress that the US has reached its legal limit for debt – and he’ll need to take drastic action.

Treasury secretary Timothy Geithner says payments into US pension schemes will be cut in a bid to stop the US borrowing more money, now that it has reached its debt ceiling.
Treasury secretary Timothy Geithner says payments into US pension schemes will be cut in a bid to stop the US borrowing more money, now that it has reached its debt ceiling.
Image: Alex Brandon/AP

THE UNITED STATES’ Treasury Secretary, Timothy Geithner, has said that he will immediately halt investments in two big government pension plans, as part of urgent moves allowing the government t0 continue to borrow money.

Geithner wrote to Congress this morning informing it that the government had officially reached its $14.3 trillion borrowing limit, and repeated his warning that the government would risk having to default on its debts if the legal limit was not raised by early August.

Even though the government has reached its official borrowing limit, Geithner said unexpected revenue and bookkeeping manoeuvres will allow the Treasury to continue auctioning debt for another 11 weeks.

Geithner has suspended pension payments in the past when Congress has held off raising the debt limit. The money that the two pension funds will lose will be replaced when Congress votes to raise the borrowing limit.

The debt limit is the amount of money the government can borrow to help finance its operations. The nation has reached its debt limit simply because the federal government has grown accustomed to borrowing massive amounts of money to cover its budget deficit each year.

The latest estimates show that the United States borrows around 40 cents out of every dollar in government expenditure.

The Congressional Budget Office projects that this year’s deficit will total $1.4 trillion – almost matching the all-time record deficit recorded in 2009, and marking the third straight year in which the federal deficit will exceed $1 trillion.

Republicans have said they will not approve any bills raising the borrowing limit until Congress and the White House agree on a plan to reduce the government’s ballooning deficit through spending cuts.

House Speaker John Boehner last week said that the scale of any budget cuts should be larger than any increase in the debt ceiling.

Vice-president Joe Biden is holding negotiations with congressional leaders over the types of deficit-cutting measures that need to be approved to win approval of a higher debt limit.

Additional reporting by AP

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