Treasury Secretary Jacob Lew warned Wednesday the US government will have no more flexibility to juggle spending and meet its obligations after October 17, under a statutory debt cap.
Lew told Congress that, after months of maneuvers to meet government commitments without added borrowing, those “extraordinary measures” will be exhausted by that date.
That will leave the Treasury with only $30 billion in cash to meet ever-mounting demands that can only be met by borrowing more money.
“This amount would be far short of net expenditures on certain days, which can be as high as $60 billion,” Lew said in a letter addressed to John Boehner, speaker of the House of Representatives.
“If we have insufficient cash on hand, it would be impossible for the United States of America to meet all of its obligations for the first time in our history.”
Lew urged the House to increase the borrowing ceiling, which has been locked at $16.7 trillion since May.
“Extending borrowing authority does not increase government spending; it simply allows the Treasury to pay for expenditures Congress has already approved,” he wrote.
“As such, I respectfully urge Congress to act immediately to meet its responsibility by extending the nation’s borrowing authority.”
The letter came as Republicans in Congress House battle with the White House over the government’s budget for fiscal 2014, which begins on October 1.
Republican refusal to back any new spending bill that provides funding for President Barack Obama’s signature health care reforms could lead to a government shutdown.
In a similar battle in July-August 2011, the issue of raising the debt ceiling was wrapped into the budget fight, and many worry the same could happen again in a fresh bout of brinksmanship that could rock markets.
So far the two issues have remained separate, but in anticipation of another possible debt ceiling crisis, the House has already passed legislation setting priorities for spending in case the Treasury has to miss some payments.
In his letter Wednesday, Lew called that legislation “ill-advised”, saying the government “should never have to choose” between paying salaries, retirement or health care benefits, or other obligations.
“There is no way of knowing the damage any prioritization plan would have on our economy and financial markets,” he warned.
Lew reminded lawmakers that the 2011 impasse over the debt ceiling and the budget “caused significant harm to the economy.”
That fight was resolved just hours before the country could have defaulted on its debt, but nevertheless led to an historic downgrade of the US credit rating, the first time ever it lost its AAA status with Standard & Poor’s.
“If Congress were to repeat that brinksmanship in 2013, it could inflict even greater harm on the economy,” Lew said in his letter.
“And if the government should ultimately become unable to pay all of its bills, the results could be catastrophic.”