The Treasury Department announced further steps to keep funding the government without going over the nation’s debt limit, amid a stalemate between Congress and the Obama administration on approving an increase in the ceiling.

The U.S. declared a “debt-issuance suspension period” under the statute governing the Civil Service Retirement and Disability Fund. That allows the U.S. to redeem existing Treasury securities held by the fund as investments, and suspend new investment. Each month a debt-issuance suspension period lasts frees up about $6.4 billion, according to the Treasury.

During this period, civil service benefit payments will continue to be paid and won’t be affected by the action. However, once all of the so-called extraordinary measures it has at its disposal to avoid breaching the limit have been exhausted, the U.S. government will be limited in its ability to make payments across the government, the Treasury says.

Treasury Secretary Jacob J. Lew made the announcement in a letter to lawmakers. The suspension period will be from May 20 to Aug. 2, he wrote. The Treasury also will suspend additional investments of amounts credited to Postal Service Retiree Health Benefits Fund, he wrote.

Lew in a May 17 letter asked Congress to take action as soon as possible to raise the debt limit and “remove the threat of default.”

Standard & Poor’s downgraded the U.S. credit rating for the first time in August 2011, citing the partisan wrangling over the debt limit.

U.S. policy makers must address debt loads projected to rise later this decade to avoid a 2013 downgrade, even as the latest budget projections are “credit positive,” according to Moody’s Investors Service in a Monday report.

The Treasury said May 15 it will suspend sales of State and Local Government Series non-marketable securities until further notice. 

(Bloomberg)