FROM THE OFFICE OF PUBLIC AFFAIRS

In order to finance a number of regularly scheduled federal payment obligations, this morning we announced two auctions for cash management bills: today for $23 billion, and tomorrow for $23 billion.

Absent other actions, this borrowing would put the Treasury above the current statutory debt ceiling of $5.950 trillion. Therefore, this morning Secretary O'Neill announced that beginning on April 4, 2002 and ending on or about April 18, 2002, actions are needed to prevent the government from hitting the debt limit.

As you know, we have forecast for months that, barring Congressional action, we would reach the debt ceiling this spring. During the first half of April, the government must make several monthly benefit payments, such as Social Security ($30 billion), Medicare/Medicaid ($18 billion), and civilian and military payroll ($6.4 billion). We also expect to pay $20 billion in individual tax refunds. We are using the two cash management bills to bridge us until the tax receipts due April 15.

Treasury has taken all prudent steps to avoid reaching the statutory debt limit, including reducing the size of our regular bill auctions and drawing down available cash. Because Congress has not raised the statutory debt limit, the Secretary must now exercise the Treasury's legal authority to suspend investments in the Government Securities Investment Fund (G-Fund) for a brief period. Secretary Rubin took a similar step in 1995.

This action will not affect G-Fund beneficiaries. The G-Fund will be restored with interest as soon as there is room under the debt ceiling to do so (i.e., after April 15). Congress could restore the G-Fund more quickly by raising the debt ceiling.

The April 15 tax inflows will only postpone our breaching the debt ceiling for a few months. At some point this summer, our projected borrowing needs will exceed the limited flexibility that G-Fund suspension and similar strategies provide. We will be able to make a more precise estimate after we have analyzed the tax receipts, at the end of April.

We continue to work with the Congress to enact a permanent increase in the debt limit as the Administration has requested.