Treasury Secretary John Snow said he would use pension money to keep the government running.
In a letter to US Senate majority leader Bill Frist on Thursday, Snow said he was immediately suspending payments to a federal employees’ retirement scheme, the Government Securities Investment Fund (G-Fund).
The missing money would be repaid in full later, with no net effect on the fund or retirees, he promised.
The treasury secretary said he was forced to take the emergency accounting step because congress had not acted on his 2 August request for the government’s legal debt limit to be raised.
Any move by congress to raise the debt limit could be politically embarrassing.
Bush, Kerry are in a statistical tie
Democrats pounced on the news as evidence of fiscal mismanagement by the administration, less than three weeks before Bush faces Democratic challenger Senator John Kerry in the 2 November presidential election.
“George Bush continues to make history for all the wrong reasons: He’s the first president to go without creating a new job since the Great Depression and now he’s run up more debt in [a] shorter period of time than all the presidents combined in the 200 years from Washington through Reagan,” said Kerry campaign spokesman Phil Singer.
“On top of that, this is the third time he’s broken his promise not to raise the debt ceiling. His fiscal mismanagement is taking its toll on America and it’s time for a fresh start,” he said in a statement.
House Democratic leader Nancy Pelosi described Snow’s manoeuvre as “a shameful admission” that the administration’s economic policies had failed the American people.
“His [Bush’s] fiscal mismanagement is taking its toll on America and it’s time for a fresh start”
The overall US debt – the total accumulated financial liabilities of the country – now amounted to $7.38 trillion, she said.
“The Republican leadership knew that the debt limit would be reached this month but did not want an embarrassing vote on raising the debt ceiling until after next month’s election so Republicans are now resorting to extraordinary accounting measures to avoid that vote.”
In the year before Bush came to office, his predecessor Bill Clinton produced a $236-billion annual budget surplus.
In fiscal 2004, ended 30 September, Bush’s team is estimated to have incurred a record annual budget deficit of $415 billion, according to the bipartisan congressional budget office.
The official 2004 budget figures, showing the gap between annual government spending and income, are due this week.