With no resolution in sight for the fiscal cliff, other problems are starting to arise as Treasury Secretary Tim Geither announced the debt ceiling will be reached by Monday, Dec. 31.
Geither explained in a letter to Congress that once the debt ceiling is reached, the Treasury Department may take “extraordinary measures” to continue functioning. However this is only a temporary measure. The debt ceiling will eventually be reached if no action is taken to raise the ceiling.
The “extraordinary measures” will temporarily reduce spending. Geither estimated that with certain measures, including suspending investments and potentially holding off paying benefits to certain government employees, could save as much as $200 billion dollars.
Although this could save money, it will not avert reaching the ceiling.
That will likely happen in two months, though Geither explained in his letter that it is impossible to say how long the measures could hold off reaching the debt ceiling.
Once the debt ceiling is reached, if Congress does not take legislative action to raise the debt ceiling, the Treasury Department will not have the authority to make government payments, including Social Security.
“Once the extraordinary measures have been exhausted, however, the U.S. Government will be limited in its ability to make payments across the government,” the letter read.
If the country falls off the fiscal cliff, a mass of spending cuts will go into effect, along with tax increases. However, this will likely allow the Treasury Department more time before the debt ceiling is reached.