Geithner works to avert default

U.S. Treasury Secretary Timothy Geithner. (Feb. 16, 2012)

U.S. Treasury Secretary Timothy Geithner. (Feb. 16, 2012) (Credit: Getty Images)

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WASHINGTON - Treasury Secretary Timothy F. Geithner said Wednesday he would take "extraordinary measures" to postpone a U.S. default in early 2013 while President Barack Obama and Congress work out a deficit-reduction deal.

Geithner, in a letter to congressional leaders Wednesday, said the government will hit its statutory debt ceiling on Dec. 31. To avert a default, the Treasury will create about $200 billion in headroom under the debt limit, which would normally last about two months.

"However, given the significant uncertainty that now exists with regard to unresolved tax and spending policies for 2013, it is not possible to predict the effective duration of these measures," Geithner said.

Geithner's letter adds urgency to talks between Obama and congressional Republicans on a deficit-reduction plan. Obama has asked that raising the debt ceiling be part of that plan.

Obama and Congress return to Washington Thursday after an abbreviated Christmas holiday. They have five days before a deadline that would start to trigger more than $600 billion in tax increases and spending cuts that might restart a recession.

House leaders, who were forced last week to withdraw their latest proposal in the negotiations before it could face a vote, Wednesday called on the Senate to act next. They said the Senate should amend bills passed by the House earlier this year, including a one-year extension of tax cuts for all income levels.

"Once this has occurred, the House will then consider whether to accept the bills as amended, or to send them back to the Senate with additional amendments," said a statement from Speaker John Boehner (R-Ohio) and other House GOP leaders.

Boehner and Obama have been unable to agree on the tax-rate increase on top earners that Obama wants or the cuts to entitlement programs that Boehner seeks. Both parties have begun work on minimal deficit-reduction proposals, aimed at avoiding the automatic tax increases and spending cuts while a bigger package is negotiated.

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