U.S. Treasury Secretary Henry Paulson said Wednesday he expects the federal government to reach its $8.965 trillion statutory debt limit on Oct. 1.
Paulson, in a letter to congressional leaders, urged quick Senate approval of a bill that would increase U.S. borrowing authority by $850 billion and reduce chances uncertainty over federal funding would exacerbate financial market turmoil.
"The full faith and credit of the United States, to which we all remain committed, is a national asset and a cornerstone of the global financial system," Paulson wrote.
"In light of current developments in financial markets, which would be exacerbated by uncertainty in the Treasuries market, I urge the Senate to pass the legislation reported by the (Senate) Finance Committee to increase the debt limit as soon as possible," he wrote.
The finance panel last week approved an increase in the federal debt limit to $9.815 trillion, matching a credit increase approved by the U.S. House of Representatives earlier this year.
As of Monday, the federal debt stood at $8.914 trillion, about $52 billion below the limit. Paulson had previously estimated that the debt limit would be breached in early October, but based on estimated September's corporate and individual income tax payments, he said this would now occur on Oct. 1.
The Treasury can take a number of emergency measures to stay under the the debt limit for a period of time if the Senate fails to increase the debt limit.
These include temporarily diverting money from several federal employee pension and disability funds and dipping into the Exchange Stabilization Fund, a seldom-used pool of money earmarked to stabilize currency rates.
The Treasury also can suspend issuance of debt securities to state and local governments and sell more short-term cash management bills to gain more precise day-to-day control over federal finances.
Paulson has expressed reluctance to resort to such measures, saying they could create unnecessary uncertainty for financial markets already rocked by U.S. housing woes and a credit squeeze.