Added tax revenues to delay debt crisis
The definition of debt
STEVE CHIOTAKIS: Treasury Secretary Tim Geithner is working some accounting magic. That'll give Congress a a few more weeks to negotiate a deal to raise the nation's debt ceiling. Now Geithner says the government won't default on its debt until August 2nd. Geithner's fancy footwork starts this Friday.
And Marketplace's Nancy Marshall Genzer is with us live to talk about what he's got up his sleeves. Good morning, Nancy.
NANCY MARSHALL GENZER: Good mroning.
CHIOTAKIS: So how did the Treasury Secretary do this? I mean, I thought the old deadline of July 8th was pretty firm.
GENZER: Yeah, that's what everybody thought. But Geithner actually got a little help from you and me, Steve -- the taxpayers. It seems the IRS actually took in more tax revenue than expected last month.
I talked to Harvard economist Kenneth Rogoff about this.
KENNETH ROGOFF: They never know quite how much is going to be rolling in. This is a small bonanza that gives them enough cash to go for a little bit longer.
CHIOTAKIS: All right so the government Nancy, has more cash. But there's more to it than that, right? I mean isn't Secretary Geithner moving money around to make it last a little longer?
GENZER: That's exactly what he's doing. And Steve, it's important to remember that Geithner isn't actually solving any problems. All he's doing is buying time. The first thing he'll do this Friday is stop a program that allows state and local governments to tuck away money into special government securities that pay a set interest rate. Cities and states aren't allowed to invest in say, a hedge fund, which is probably a good thing. So this is where they usually put their money to keep it safe. But by closing off this program, the Treasury has one less thing on its balance sheet. And Geithner is also doing some other things. He's going to siphon some money out of two federal pension funds. And all of this frenzied tap dancing will give Congress almost a month more to bicker over the budget.
CHIOTAKIS: Marketplace's Nancy Marshall Genzer in Washington. Nancy, thanks.
GENZER: You're welcome.
JEREMY HOBSON: Remember the federal debt ceiling? Well we were supposed to reach it sometime this month. Now, it looks like we'll have a little more time. That's thanks to a surprise increase in tax revenues and some fancy footwork by U.S. Treasury Secretary Tim Geithner.
Marketplace's Nancy Marshall Genzer reports from Washington.
NANCY MARSHALL GENZER: Geithner isn't solving any problems. All he's doing is buying time. The first thing he'll do Friday is stop selling certain securities to state and local governments. That'll make it harder and more expensive for them to raise money. But Geithner says he has no choice.
Geithner will also access two federal pension funds. His tap dancing will give the government some breathing room. Plus, the IRS took in more tax revenue than expected last month.
Kenneth Rogoff is a Harvard economist.
KENNETH ROGOFF: They never know quite how much is going to be rolling in. So this is a small bonanza that gives them enough cash to go for a little bit longer.
Geithner's good news comes as Congress returns from its spring break. A number of groups are trying to develop deficit reduction plans, including some high-profile senators called the Gang of Six. They'll announce soon whether they've come p with a plan.
In Washington, I'm Nancy Marshall Genzer for Marketplace.