Hike Debt Limit to $3.51 Trillion, Treasury Urges

The Treasury told Congress today it must boost the federal debt limit to $3.51 trillion before it begins its August recess or a first-ever government default likely will occur before lawmakers return in September.

The current debt limit is $3.12 trillion and the debt reached $3.09 trillion on Monday. The nation’s debt topped $3 trillion for the first time last April.

“Treasury’s current estimates show that the permanent ceiling of $3.12 trillion will be sufficient only until mid-August,” Treasury Undersecretary Robert R. Glauber told the House Ways and Means Committee.

“Without an increase in the debt limit, it appears likely that the Treasury will run out of cash and borrowing authority and default on the government’s obligations in mid-August,” he said in his prepared testimony. “It is highly likely that default would occur before Congress returns in September.”

As did Treasury Secretary Nicholas F. Brady in a letter to Congress in June, Glauber said the government’s estimates are uncertain because of difficulty in predicting the cash needed to bail out the saving and loan industry.

“A significant near-term increase in RTC spending above the current estimate could accelerate the need for an increase in the debt limit to early August in order to invest the Social Security trust funds fully,” he added.

The RTC, or Resolution Trust Corp., was created by Congress to conduct the bailout.

Glauber said Treasury estimates call for a $3.51-trillion debt limit for the fiscal year starting Oct. 1. For fiscal year 1992, Treasury estimates a debt limit need of $3.81 trillion and for fiscal 1993 a limit of $4.05 trillion, he said.

“If Congress were to leave for its August recess--scheduled for Aug. 6 through Sept. 4--without increasing the debt limit, the Treasury would likely default on $20 billion of notes maturing on Aug. 15 and be unable to make interest payments totaling about $21 billion that day,” Glauber testified.

“Also, the United States most likely could not honor, on Aug. 3, $3 billion of military retirement and salary payments or payments totaling over $11 billion to Social Security and supplemental security income recipients, railroad retirees and veterans,” he added.