In a letter to Congress, Geithner--who had previously predicted the U.S. would hit the debt ceiling between March 31st and May 16th--urged Congress to act as soon as possible to increase the debt limit. He wrote: “I have written to Congress on previous occasions regarding the importance of timely action to increase the debt limit in order to protect the full faith and credit of the United States and avoid catastrophic economic consequences for citizens.”

According to CNN Money:

Geithner said he would have to suspend investments in federal retirement funds until Aug. 2 in order to create room for the government to continue borrowing in the debt markets.

The funds will be made whole once the debt limit is increased, Geithner said. "Federal retirees and employees will be unaffected by these actions."

He went on to urge Congress once again to raise the country's legal borrowing limit soon "to protect the full faith and credit of the United States and avoid catastrophic economic consequences for citizens."

Geithner said that the U.S. will not longer be able to pay its bills in full if the Obama Administration, House Republicans and Senate Democrats do not come up with an agreement on how to deal with the issue by Aug. 2.

Market Watch reported:

Big banks have warned about the impact of the ceiling being violated and the U.S. possibly defaulting on its debt. Federal Reserve Chairman Ben Bernanke, speaking in front of a Senate Banking Committee hearing last week, said not doing so runs the risks of increasing interest rates, a worsening deficit and a destabilized financial system.

  “The worst outcome would be that the financial system would again destabilize, which would have extremely dire consequences for the economy,” Bernanke said.

However, Republicans and Democrats remain divided on how to deal with the situation, with some GOP leaders using the debt limit issue as an opportunity to discuss spending cuts and reforms on entitlement programs.

“There will be no debt limit increase without serious budget reforms and significant spending cuts – cuts that are greater than any increase in the debt limit,” House Speaker John Boehner said in a statement.

“The emergency we enter today isn’t about a penny of new spending," Senate Majority Leader Harry Reid countered. “It’s not about new programs or new taxes. It’s not about creating new obligations, only meeting existing ones. The debt limit is about paying what we already owe.”

The debt ceiling has been raised ten times since 2001.