The U.S. Treasury Department is warning that the government will reach its $16.4 trillion debt limit this year, potentially triggering another downgrade of U.S. debt by credit rating agencies.
With the debt limit fast approaching, the Treasury indicated that “extraordinary measures” might give Congress some additional time to raise the debt limit, the Los Angeles Times noted.
Congress is already facing mandatory tax hikes and steep budget cuts, tied to last year’s debt-limit increase. Those measures could take effect at the beginning of next year if Democrats and Republicans cannot come to a new agreement.
Republican leaders say that they will not back any increase in the debt limit without large spending cuts.
Analysts in Washington have dubbed the combination of higher taxes and lower spending a “fiscal cliff” that could send the U.S. economy spiraling back into recession next year if nothing is done to avoid it.
With the presidential race now in its final week, no action is expected until after the nation votes on Tuesday. Changes in the balance of power in Congress will also affect spending and tax negotiations.