Congressional inaction on a bill raising the federal debt ceiling forced the Treasury to postpone its weekly bill auction Monday and threatened the government with its first default in history.
The Treasury had planned to offer $16 billion in three- and six-month bills Monday, but postponed the sale "because Congress has not completed action on legislation to increase the statutory debt limit."
The Treasury lost further borrowing authority Oct. 31 when the debt limit reverted from $2.87 trillion to $2 trillion. Because it already has reached the lower limit, the government faces default on some of its debt as early as Thursday.
Treasury Secretary Nicholas F. Brady said last week that if Congress fails to increase the limit by today, "the government will run out of cash and default on Nov. 9" when about $13.8 billion in Treasury bills mature.
"Each day that Congress fails to act, however, will cause additional disruption in our borrowing schedule, possibly resulting in higher interest costs to the taxpayer," Brady said in a speech to Maryland bankers.
"To avoid these potential costs and the prospect of default, immediate congressional action is imperative," he said.
The House has passed a $3.1-trillion debt ceiling, but action has been stalled in the Senate by Republican demands that it be accompanied by enactment of a capital gains tax cut, a top priority for President Bush.
The White House abandoned that effort Thursday, and Senate leaders from both parties were discussing legislation Monday to increase the limit. However, any bill approved by the Senate likely would differ from the House version and efforts to reach a compromise would require additional time.
Michael Basham, deputy assistant Treasury secretary, told reporters last week that plans for $40 billion in additional borrowing this week probably would have to be postponed if Congress doesn't complete action on a new debt limit by today.