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Treasury: Debt ceiling also threatens pay

Apr. 5, 2011 - 11:23AM   |   Last Updated: Apr. 5, 2011 - 11:23AM  |  
Treasury Secretary Timothy Geithner said that if Congress fails to increase the debt limit, military salaries and retirement benefits are among the services that would have to be stopped, limited or delayed.
Treasury Secretary Timothy Geithner said that if Congress fails to increase the debt limit, military salaries and retirement benefits are among the services that would have to be stopped, limited or delayed. (Jacquelyn Martin / The Associated Press)
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Military paychecks are threatened by more than just the possibility of a government shutdown.

The Treasury Department warned congressional leaders Monday that military pay and retirement benefits are in jeopardy unless lawmakers agree to increase the federal debt ceiling.

A debt ceiling crisis is coming in May, Treasury Secretary Timothy Geithner wrote in a letter to House and Senate leaders. The U.S. is within $95 billion of reaching the $14.3 trillion borrowing cap, which, when reached, could force the government to use cash reserves and drastically cut spending.

"If Congress failed to increase the debt limit, a broad range of government payments would have to be stopped, limited or delayed, including military salaries and retirement benefits, Social Security and Medicare payments, interest on the debt, unemployment benefits and tax refunds," Geithner said. "This would cause severe hardship to American families and raise questions about our ability to defend our national security interests."

Geithner's letter predicts the debt limit will be reached no later than May 16, and it is more likely to be earlier than later.

The new warning about U.S. borrowing power comes as lawmakers are still trying to avoid a Friday government shutdown in a battle over the 2011 federal budget. A shutdown would require U.S. service members to report to work without knowing if the Defense Department will be able to pay them on April 15, the next military payday.

A shutdown is threatened because the temporary funding bill under which the government now operates is due to expire a midnight on April 8. The White House and congressional leaders are trying to negotiate a deal to extend funding, either through another temporary appropriations bill or a larger and more permanent bill, but no agreement has been reached.

Spending cuts are at the root of the debate involving both the debt ceiling and 2011 appropriations bills. A substantial number of House Republicans are demanding that cuts in federal programs be part of any final agreement. Some House Republicans believe the debt ceiling would not have to be lifted at all if Congress would approve $100 billion or more in immediate federal program cuts.

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