In a letter to congressional leadership, Treasury Secretary Jack Lew said the U.S. government would hit its debt limit sooner than expected. Lew wrote Monday that the U.S. government will reach the limit of its borrowing ability in mid-October and urged Congress to reach a budget deal to raise the $16.7 trillion borrowing limit.
Lew’s concern set a more specific deadline for congressional action, demanding a vote to increase the debt ceiling to avert a financial crisis.
Based on our latest estimates, extraordinary measures are projected to be exhausted in the middle of October. At that point, the United States will have reached the limit of its borrowing authority, and Treasury would be left to fund the government with only the cash we have on hand on any given day. The cash balance at that time is currently forcasted to be approximately $50 billion.
Echoing a speech he gave to the Commonwealth Club of California last week, Lew said, “Congress should act as soon as possible to meet its reponsibility to the nation and to remove the threat of default.”
Although lawmakers are still in recess, they will be forced to deal with several economic and fiscal catastrophes when they return on September 9th. Along with raising the debt limit, Congress still has sequestration and funding the government to deal with. Lew argued that raising the country’s borrowing limit would not increase government spending, a common criticism by House Republicans.
Extending borrowing authority does not increase government spending; it simply allows the Treasury to pay for expenditures Congress has previously approved. Protecting the full faith and credit of the United States is the responsibility of Congress because only Congress can extend the nation’s borrowing authority. Failure to meet that responsibility would cause irrreparable harm to the American economy.
If Lew’s letter is reminiscent of Tim Geithner’s warnings to Congress two years ago, Speaker Boehner’s views on the debt limit haven’t changed either. Speaking at a press conference before the August break, Boehner said, “We’re not going to raise the debt ceiling without real cuts in spending. It’s as simple as that.”
With some Republicans threatening a government shutdown and the White House refusing to negotiate over the debt ceiling, it feels more like 2011 than 2013.