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US Debt Deadline Unlikely to Deviate Much

Reuters
Tuesday, 28 Jun 2011 | 1:21 AM ET

U.S. Treasury Secretary Timothy Geithner is not expected to significantly shift the Aug. 2 date when the government will have exhausted all of its emergency measures to stave off default, a source familiar with the administration's efforts said Monday.

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That means the Obama administration and Congress still have about a month to reach a deal to raise the $14.3 trillion debt limit on how much the government can borrow.

After that date, the Treasury Department will run out of money to pay government bills, including interest on U.S. debt.

Delayed or missed debt payments would rock financial markets and could send the country into a new recession, top Wall Street and policymakers have said.

The source requested anonymity because the source was not authorized to speak on behalf of the administration and warned the projections were not final.

The Treasury Department is due to provide congressional leaders with an updated forecast as early as Friday.

A significant shift in the Aug. 2 drop-dead date would fuel suspicions among a growing group of Republicans that the deadline can be ignored and that the administration is fear-mongering.

"Delaying it will reinforce the argument that this crisis is a creation of Treasury, the White House and the political establishment," said Stuart Rothenberg, a non-partisan political analyst.

He said it also will fuel arguments that the administration is picking "dates out of a hat to try to put pressure on Republicans to raise taxes." The White House is locked in a battle with lawmakers over how to raise the debt limit and curtail government spending.

Republicans oppose raising taxes and want to focus on spending cuts. Democrats and the administration say the deficit cannot be slashed without increasing tax revenues.

Although the U.S. Treasury has so far received more than $40 billion in revenue in corporate taxes in June, the amount is a fraction of what is needed to keep the government operating.

The Treasury borrows on average about $125 billion per month to meet obligations such as paying elderly and disabled Americans social security benefits.

On top of that, more than $500 billion in U.S. debt is maturing in August. Analysts echoed the administration's interim projections.

"The Treasury's cash balance following the June quarterly tax date is slightly stronger than we expected, which may buy the Treasury a few extra days in August," research firm Wrightson ICAP said in a note to clients.

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