The U.S. Treasury has fewer tools than it did last summer to stave off a debt default if Congress does not raise the government's borrowing limit before year-end, a report said on Tuesday.
The looming deadline further complicates Washington's efforts to deal with the "fiscal cliff" of government spending cuts and tax rises due to be implemented in early 2013 that economists fear could tip the economy back into recession.
It is unclear whether Congress will be able to raise the debt ceiling before the end of the year, though top Democratic Senator Harry Reid said on Tuesday that the higher debt limit would have to be part of a deal to avoid the fiscal cliff.
Democrats "would be somewhat foolish to work out something on stopping us from going over the cliff," without raising the debt ceiling as part of that bargain, Reid told reporters.
The United States is on track to hit the $16.4 trillion legal limit on its debt in the last week of December with big payments due New Year's Eve, including for the Social Security and Medicare trust funds, according to an analysis from the Bipartisan Policy Center.
Although the Treasury has the power to shift certain funds around in order to pay crucial bills such as the interest on U.S. debt, those measures will not buy as much time as they did last summer, when battles over raising the limit pushed the United States to the brink of a debt default, according to the report.
"If the debt limit is not increased as part of (this year's) negotiations, policymakers will be left with only a matter of weeks to ensure that all federal financial obligations continue to be met in full and on time," the think tank concluded after analyzing the Treasury's daily and monthly cash flows.
In 2011, the Treasury's tools, which include temporarily dipping into government retirement trust funds, lasted roughly three months, from May until early August.
This time, those measures will only last four to eight weeks, or until sometime in February, because one of the funds relied on in 2011 is not available and government expenses typically spike in February on tax refunds.
2011 DEBT LIMIT FIGHT TO COST $19 BLN-REPORT
The Bipartisan Policy Center report estimates that the 10-year cost to taxpayers caused by 2011's debt limit delay will amount to $18.9 billion due to elevated interest rates and because many of the bonds issued during the stand-off remain outstanding.
As part of the deal to raise the debt ceiling last year, Congress and the Obama administration agreed to reduce government spending by $1.2 trillion over the next decade, with the bulk of the cuts coming from the Defense Department.
Those cuts, known as sequesters, along with the $500 billion in tax cuts that are about to expire December 31, comprise the "fiscal cliff" - looming austerity measures that may slow economic growth and that have rattled financial markets.
Lawmakers and the Obama administration have only started trying to hammer out a solution and are deeply divided on how to handle the expiring tax cuts.
President Barack Obama wants the tax breaks for the wealthiest to expire. Republicans oppose a higher tax rate and want Democrats to reduce the budget deficit in part by reforming big government programs, like Social Security and Medicare.
While it is essential Congress and the Obama administration confront the debt ceiling soon, lawmakers are primarily focused on the tax hikes and sequesters.
"A failure to reach a timely agreement this time around could impose even heavier economic and financial costs," Federal Reserve Chairman Ben Bernanke told the Economic Club of New York last week.
"As you will recall, the threat of a default in the summer of 2011 fueled economic uncertainty and badly damaged confidence, even though an agreement ultimately was reached," he said.
The Bipartisan Policy Center, founded in 2007 by former Senate Majority Leaders Howard Baker, Tom Daschle, Bob Dole and George Mitchell, "drives principled solutions through rigorous analysis, reasoned negotiation, and respectful dialogue," according to its website.