WASHINGTON — The Obama administration will begin to tap federal retiree programs to help fund operations after the government loses its ability today to borrow more money from the public, adding urgency to efforts in Washington to fashion a compromise over the debt.
Treasury Secretary Timothy Geithner has warned for months that the government would soon hit the $14.3 trillion debt ceiling — a legal limit on how much it can borrow. With the government poised to reach that limit today, Geithner is undertaking special measures in an effort to postpone the day when he will no longer have enough funds to pay all of the government's bills.
Geithner, who has already suspended a program that helps state and local governments manage their finances, will begin to borrow from retirement funds for federal workers. The measure won't have an impact on retirees because the Treasury is legally required to reimburse the program.
The maneuver buys Geithner only a few months of time. If Congress does not vote by Aug. 2 to raise the debt limit, Geithner says, the government is likely to default on some of its obligations, which he says would cause enormous economic harm and the suspension of government services, including the disbursal of Social Security funds.
Many congressional Republicans, however, have been skeptical that breaching the Aug. 2 deadline would be as catastrophic as Geithner suggests. What's more, Republican leaders are insisting that Congress cut spending by as much as the Obama administration wants to raise the debt limit, without any new taxes. Obama is proposing spending cuts and tax increases to rein in the debt.
"Everything should be on the table, except raising taxes," House Speaker John Boehner, R-Ohio, said on CBS's Face the Nation. "Because raising taxes will hurt our economy and hurt our ability to create jobs in our country."
Geithner's plan to tap federal retiree programs as a temporary means to avoid a government default comes as the Obama administration has shown growing interest in altering those programs to curb the debt in the long run.
Administration officials have expressed interest in raising the amount that federal employees contribute to their pensions, the Washington Post reported.
The Republicans have suggested that the civilian work force contribute more to its retirement in the future, effectively trimming 5 percent from salaries.
The administration has not been willing to go that far in talks being led by Vice President Joe Biden.