U.S. Treasury to dodge default

Wednesday, May 15, 2002

WASHINGTON -- The Bush administration plans to shift billions of dollars of civil service retirement funds to non-interest-bearing accounts this week in a move to prevent the federal government from defaulting on the national debt.

The Treasury Department's action, announced Tuesday, would free up room for more government borrowing.

Peter Fisher, Treasury's undersecretary for domestic finance, said the juggling of funds could start today or Thursday.

The move is necessary because Treasury's request to extend the government's authority to borrow has been mired in a political fight on Capitol Hill. Lower than expected tax payments are putting a big squeeze on the government's cash flow.

Treasury Secretary Paul O'Neill has repeatedly asked Congress to boost the debt limit by $750 billion. The limit now stands at $5.95 trillion.

The juggling of federal retirement accounts will not harm federal employees' retirement next eggs, Treasury officials said.

Treasury dodged a default in April by temporarily shifting funds from the government securities retirement account.

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