“Under normal circumstances, that amount of headroom would last approximately two months. However, given the significant uncertainty that now exists with regard to unresolved tax and spending policies for 2013, it is not possible to predict the effective duration of these measures,” wrote Timothy F. Geithner, who served as the president of the Federal Reserve Bank of New York prior to his current posting.
Geithner said the reason for the short notice and the short leeway is the confusion caused by the failure of President Barack Obama and the Congress to resolve tax and spending issues regarding what has become known as the “fiscal cliff,” the mandatory spending cuts and tax increases written into the Budget Control Act passed in August 2011.
“If left unresolved, the expiring tax provisions and automatic spending cuts, as well as the attendant delays in filing of tax returns, would have the effect of adding some additional time to the duration of the extraordinary measures,” Geithner said.
Speaker John A. Boehner (R.-Ohio) released a joint statement today, before the Geithner debt ceiling letter was released, with the other members of the GOP House leadership team: Rep. Eric I. Cantor (R.-Va), the House Majority Leader, Rep. Kevin O. McCarthy (R.-Calif.), the House Majority Whip and Rep. Catherine McMorris Rogers (R.-Wash.) stating his case for resolving the fiscal cliff.
The House Republicans have already acted to meet the crisis, he said.
“The House has acted on two bills which collectively would avert the entire fiscal cliff if enacted. Those bills await action by the Senate,” he said.
“If the Senate will not approve and send them to the president to be signed into law in their current form, they must be amended and returned to the House,” he said.
The House will act, but the Senate, controlled by Democrats, must act first, the Speaker said.
Boehner said he and the House GOP will continue to communicate, but they are convinced the problem that the governement spends too much, not that the people are taxed too little.
Geithner sent his letter to all Capitol Hill leaders, including Boehner, House Minoity Leader Nancy P. Pelosi (D.-Calif.), Senate Minority Leader A. Mitchell McConnell Jr. (R.-Ky.), Rep. Sander M. Levin (D.-Mich.), the ranking member on the House Ways and Means committee; Sen. Max S.Baucus (D.-Mont.), the chairman of the Senate Finance Committee and Sen. Orrin G. Hatch (R.-Utah), the ranking member on the Senate Finance Committee, recieved the same letter as well as individual members of the outgoing 112th Congress. The 112th Congress expires Jan. 3.
The text of the letter sent to Sen. Harry Reid (D.-Nev.), the senate majority leader is below:
December 26, 2012The Honorable Harry ReidMajority LeaderUnited States SenateWashington, DC 20510
Dear Mr. Leader:
I am writing to inform you that the statutory debt limit will be reached on December 31, 2012, and to notify you that the Treasury Department will shortly begin taking certain extraordinary measures authorized by law to temporarily postpone the date that the United States would otherwise default on its legal obligations.
These extraordinary measures, which are explained in detail in an appendix to this letter, can create approximately $200 billion in headroom under the debt limit. Under normal circumstances, that amount of headroom would last approximately two months. However, given the significant uncertainty that now exists with regard to unresolved tax and spending policies for 2013, it is not possible to predict the effective duration of these measures. At this time, the extent to which the upcoming tax filing season will be delayed as a result of these unresolved policy questions is also uncertain. If left unresolved, the expiring tax provisions and automatic spending cuts, as well as the attendant delays in filing of tax returns, would have the effect of adding some additional time to the duration of the extraordinary measures. Treasury will provide more guidance regarding the expected duration of these measures when the policy outlook becomes clearer.