Debt Reduction Advice | Debt Reduction Advice

There may be some good news on the horizon as the U.S. Treasury reduced its borrowing estimate for the federal government’s fiscal Q4 to $406 billion – a reduction of $109 billion from the initial price tag of $515 billion.

In a report issued by the Treasury, the department noted that it had borrowed less during the previous fiscal quarter that ended on June 30. The original forecast had been $361 billion but ended up at $343 billion. Expectations for the first fiscal quarter of 2010 borrowing are currently at $486 billion. This number is lower than the $569 billion deficit seen during the same time last year.

Concerns over whether the nation’s capacity to service debt or if it has reached its limit are coming at the same time that big debt holders like China, Japan, and Saudi Arabia are calling on the U.S. to reduce the risk of increasing inflation rates and the weakened dollar. Treasury Secretary Geithner made a pledge to the debt holders that the United States would focus more attention on dealing with the deficit.

At present, there are some signs that things are changing for the better. In fact, the economy may be stabilizing—at least according to some key indicators. If this is the case, then the recovery will help to lower social spending pressures for consumers and bring in more federal revenue.

Spending on banking and housing intervention efforts has been lower than earlier projections. If the recovery is stronger than the projected 2% that has been forecast for its initial quarters, the deficit would be further reduced. This would mean the Treasury would be able to borrow less.

Despite the positive development, the department will probably hit the national debt limit imposed by Congress of $12.1 trillion by the close of 2009. The legislators will be forced to increase this ceiling figure to $13 trillion—an amount nearly equal to 92% of the GDP for the United States.