US Treasury weighs stop-gap measures as Congress struggles to fix ‘fiscal cliff’

The US Treasury is considering measures needed to avert a default by the US government, as the federal government debt will hit the $16.4 trillion upper limit on 31 December, US Treasury Secretary Timothy Geithner said yesterday.

Geithner said the Treasury "will shortly begin taking certain extraordinary measures authorised by law to temporarily postpone the date that the United States would otherwise default on its legal obligations", a Xinhua report said.

In a letter to congressional leaders who are in last-ditch efforts to increase debt authorisation amidst the looming "fiscal cliff", Geitner said this is required to avert a default situation.

The Treasury expects to generate up to $200 billion through accounting measures, giving more ''headroom under the debt limit", helping the federal government run for about two months, Geithner said.

However, he said, with the uncertainties on tax and spending policies for 2013 remaining, it was not difficult to predict the effective duration of these measures.

Unless US Congress acts by the end of the year, Geithner said, a combination of tax increases and spending cuts totaling about $600 billion could drive the economy back into recession.