The US government will face a major test on whether it has the capacity to govern when it has to deal with big tax and budget decisions at the end of the year, US Treasury Secretary Timothy Geithner said on Wednesday.
Expiring tax breaks, automatic spending cuts and dwindling government funds will likely trigger another high-stakes battle between the Obama administration and Congress over how to reduce the country's debt burden.
Last year's fights over how to rein in the nation's trillion-dollar deficits and raise the US debt limit forced the government to the brink of several shutdowns, rattled global markets and stripped the United States of its top credit rating.
"It will be a big test in Washington, a big test of the country to govern itself in how Washington deals with those challenges," Geithner said at a Brookings Institution event in Washington.
"Hopefully we use it as an opportunity to make another significant step towards long-term fiscal reform at that time," he said.
The US Treasury expects the country to hit the debt ceiling or the legal limit it is allowed to borrow before the end of the year. Tax cuts enacted under former President George W. Bush, which are known as the Bush tax cuts and affect nearly all US taxpayers, will expire December 31.
And $1.2 trillion in automatic budget cuts are set to kick in early January with half hitting the defence department if Congress does not find another way to reduce the deficit by the same amount over 10 years. With the trio of fiscal decisions looming, Geithner said it would be helpful if lawmakers signalled that they would increase the debt limit without "all the drama, politics and damage that Republicans and Congress imposed on the country last summer."