JOIN USUS President Barack Obama and members of Congress prepared for one last try to avert across-the-board tax increases and spending cuts known as the fiscal cliff, as the US Treasury Department warned that it will begin taking action to prevent the government from hitting its debt limit.
Treasury Secretary Timothy Geithner said on Wednesday in a letter to congressional leaders that the department will use accounting measures to save approximately $200 billion. That could keep the government from reaching the debt limit - which is embroiled in the fiscal cliff talks - for about two months.
The move comes as Obama and the Republican congressional leadership resume negotiations that hit a stalemate last week over how to avoid the fast approaching fiscal cliff, which some economists warn could cause another recession after it takes effect in the new year. Obama decided to cut short his Hawaii vacation for an overnight flight expected to get him back to the White House on Thursday. But Congressional officials said Wednesday they knew of no significant strides toward a compromise over a long Christmas weekend, and no negotiations have been set.
Obama has sought to include an increase in the borrowing limit in the talks. But House of Representatives Speaker John Boehner and other Republican leaders have demanded concessions in return.
The Senate is due in session on Thursday, although the immediate agenda includes other matters. The House has no plans to convene, following last week's rebellion in which conservatives torpedoed Boehner's legislation to prevent scheduled tax increases on most, while letting them take effect on million-dollar wage earners.
Obama insists that no tax cuts be extended for anyone earning over $400,000 per year. Geithner said the negotiations over tax and spending policies make it difficult to predict how long he can delay reaching the borrowing limit. The absence of a specific timeframe may be intended to pressure Republicans to allow a debt limit increase in a potential budget deal.
For now, Treasury will take several steps to delay reaching the limit. Geithner said it will stop selling Treasury securities used by state and local governments to support their own sales of tax-exempt bonds. That will keep the department from accumulating more debt.
And the department will stop investing in government retirement funds. The two sides may strike a short-term agreement before New Year’s that postpones spending cuts until spring.