We're Broke... But, We Can Kick Your A__!

Treasury Says U.S. Could Face Default

By JEANNINE AVERSA
The Associated Press
Tuesday, April 29, 2003; 7:17 PM

WASHINGTON - The Treasury
Department says the United States
could face the prospect of not being
able to pay its bills in late May unless
Congress raises the government's
borrowing authority, now capped at
$6.4 trillion.

Treasury's debt managers have
taken a number of steps since
February to prevent the government
from defaulting on the national debt,
but "on current projections, the
extraordinary measures taken since
Feb. 20, 2003, will only be adequate
to meet the government's needs until
the latter half of May," said a
statement released Tuesday.

After that - absent a boost in the
government's borrowing authority by
Congress - Treasury would breach the current $6.4 trillion ceiling on the
national debt.

"The Treasury will continue to work with Congress to ensure the government's
ability to finance its operations," Treasury said.

Treasury has asked Congress to boost the government's borrowing authority,
although it has not suggested a specific amount. A proposal is pending on
Capitol Hill that would raise the debt ceiling to $7.38 trillion.

Last year, Congress boosted the old debt limit by $450 billion, from $5.95 trillion
to the current $6.4 trillion.

At that time Treasury warned that Congress would need to again increase the
government's borrowing authority.

Boosting the debt limit is more a matter of politics than economics.

Economists doubt Congress will refuse to raise the limit. A federal default is
considered unimaginable because it would rattle bond markets, force interest
rates higher, weaken the world economy and deliver a political blow to
President Bush.

Democrats point to the government's need to borrow more to ridicule President
Bush's tax cuts, his handling of the economy and ballooning federal government
budget deficits, which are expected to hit records this year and next.

Republicans blame the lingering effects of the 2001 recession and the costs of
fighting Terrorism for the need to extend the debt limit.

By Memorial Day, Republicans hope to have pushed through Congress a
tax-cut bill with a price tag of between $350 billion and $550 billion through
2013.

If Congress must approve a debt-limit extension during the same period of time,
it could play into Democrats' political argument that the new tax cut will only
make the government's red ink worse.

The government had to borrow a record $111 billion in the January-March
quarter to cover the shortfall between expenses and tax revenue. It expects to
borrow another $79 billion in the current quarter.

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On the Net:

Treasury Department: http://www.ustreas.gov/