The United States’ borrowing authority will expire in mid-October, Treasury Secretary Jack Lew said Monday, informing Congress that it must raise the debt limit by then to avert a debt default which would have disastrous implications for the economy.
“Based on our latest estimates, extraordinary measures are projected to be exhausted in the middle of October,” Lew wrote in a letter to congressional leaders. “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. … Moreover, it is not possible for us to estimate with any precision the date on which Treasury would exhaust its cash in this situation.”Lew said the statutory debt limit had been reached on May 17 and that extraordinary measures had begun then. “As I stated in that letter, Congress should act as soon as possible to protect America’s good credit by extending normal borrowing authority well before any risk of default becomes imminent.”
The mid-October deadline is sooner than some analysts had expected, and is a jolt to members of Congress ahead of their return to Washington after summer recess in two weeks. Congress also faces a separate Sept. 30 deadline to continue funding the government in fiscal year 2014 or face a shutdown.
“As I have stated previously, Congress should act as soon as possible to meet its responsibility to the nation and to remove the threat of default,” Lew wrote. “Under any circumstance–in light of its schedule, the inherent variability of cash flows, and the dire consequences of miscalculation–Congress must act before the middle of October.”
White House spokesman Jay Carney reiterated Monday, after the Lew letter was issued, that “we will not negotiate with Republicans in Congress over Congress’ responsibility to pay the bills that Congress has racked up. Period.”
“It is Congress’ responsibility to maintain the full faith and credit of the United States,” Carney said. “We have never defaulted, and we must never default. That is our position, 100 percent.”
Republican leaders, meanwhile, are trying to extract spending cuts or delay Obamacare as a prerequisite for lifting the debt ceiling. The two parties are on a collision course and the sooner-than-expected deadline raises the stakes.
“We’re not going to raise the debt ceiling without real cuts in spending. It’s as simple as that,” House Speaker John Boehner (R-OH) told reporters late July, before lawmakers left Washington for the August recess.