Treasury Secretary vows to prevent breaching debt ceiling

Treasury Secretary Paul O'Neill gave notice Monday that the Bush administration would take the "necessary steps" to prevent the government from defaulting on federal obligations, if Congress does not take up legislation to increase the debt ceiling soon.

In a letter to congressional leaders, O'Neill warned that recent projections show the government will hit the debt ceiling on March 25 and surpass it no later than April 1.

The announcement came after Treasury officials said last week that the administration might temporarily borrow billions of dollars from federal employee retirement funds. (For a more complete explanation of how the process works, see last week's Pay and Benefits Watch column.)

Late last month, O'Neill demanded that Congress take immediate action to increase the $5.95 trillion debt ceiling. But House Republicans refused to take up a standalone increase, arguing that the debt increase would expose the party to Democratic criticism that President Bush's tax cut last year had squandered the surplus.

In a statement released Monday, O'Neill vowed to act to "ensure the protection of full faith and credit of the [U.S.] government," while urging Congress "to take appropriate action to provide a permanent increase in the statutory debt ceiling."

Meanwhile, Senate Majority Leader Daschle is considering trying to push through the Senate this week a debt limit increase that would last until next March, said aides from both parties.