The government will face a major test on whether it has the capacity to govern when it faces big tax and budget decisions at the end of the year, U.S. Treasury Secretary Timothy Geithner said on Wednesday.
Before 2013, the country will be forced to deal with the expiration of tax cuts that affect nearly all taxpayers, automatic budget cuts, as well as another debate over raising the country's debt limit.
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 ahead of a meeting on Friday of finance ministers from the Group of 20, representing the world's leading industrialized and emerging market economies.
A protracted fight over how to rein in the country's trillion dollar plus deficits and raise the debt limit in 2011 forced the government to the brink of several shutdowns and stripped the country of its top credit rating.
The Treasury expects the country to hit the debt ceiling or the legal limit it is allowed to borrow before the end of the year and individual tax cuts enacted under former President George W. Bush - known as the Bush tax cuts - will expire December 31.
As well, $1.2 trillion in automatic budget cuts are set to kick in early January, which will force the Obama administration and Congress to deal with the country's fiscal problems.
Hopefully we use it as an opportunity to make another significant step towards long term fiscal reform at that time, Geithner said.
(Reporting by Glenn Somerville and Rachelle Younglai Editing by W Simon)