US could hit debt ceiling by end-year end

The treasury department said yesterday that the US probably would hit its $16.4-trillion borrowing limit by the end of the year, at the same time that Congress would be grappling with the automatic tax hikes and large government spending cuts scheduled to kick in 1 January.

According to the prediction of the Congressional Budget Office and most economists another recession in 2013 was imminent if the confluence of tax increases and spending reductions, known as the fiscal cliff, took place.

Further, proximity to the debt limit - not to mention hitting it, would lead to a second downgrade of the US credit rating. A bitter stand-off over the issue in 2011 had led to the first credit revision.

According to the Treasury, it could take "extraordinary measures" to juggle the nation's finances to give Congress and the White House more time to work on a debt-limit increase, however, even those steps - essentially a series of accounting maneuvers - would buy only into early 2013 before the government faced a possible default.
As of Tuesday, the US debt stood at $16.165 trillion.

According to Matthew Rutherford, assistant treasury secretary for financial markets, he thought, as had been seen last summer (2011), it was important that the debt limit was raised in a timely manner, but that really was in Congress' hands.

It was the agreement then to increase the limit that led to the  $1.2 trillion in automatic spending cuts that formed part of the fiscal cliff. The expiration of the George W Bush-era cuts fromed the other part.