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Geithner gives Congress more time on debt limit

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MARTIN CRUTSINGER | May 2, 2011 06:00 PM EST | AP

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WASHINGTON — Treasury Secretary Timothy Geithner is giving Congress more time to negotiate a deal that would raise the nation's borrowing limit.

The U.S. government will hit its $14.3 trillion borrowing limit on May 16. The debt limit is the amount the government can borrow to help finance its operations.

In a letter to congressional leaders, Geithner said Monday that he can delay a default on the debt until Aug. 2, by using a series of bookkeeping maneuvers to keep the government running. That's nearly a month longer than the July 8 deadline Geithner had previously cited.

Congress is negotiating to raise the debt limit. But Republicans have said they will not vote to do so until lawmakers reach an agreement with the White House on further spending cuts. With Congress back from a two-week recess, negotiations are expected resume this week.

There was little market reaction to Geithner's letter, the latest in a series of updates on when the borrowing limit will be reached. While he extended the default deadline to Aug. 2, Geithner urged Congress to act without delay and not wait until the August deadline.

But in the meantime, he can take steps to keep the government running. His first will be made Friday, when the government stops selling Treasury securities used by state and local governments to support their own sales of tax-exempt bonds. Treasury has suspended such sales six times over the past two decades, all in conjunction with previous debt fights. The last suspension was in 2007.

The Treasury Department also announced Monday that it plans to sell $156 billion in debt during the current April-June quarter. It will be able to achieve those sales with the amount of room that still exists under the debt limit and the extra room made through Geithner's maneuvers.