Treasury Secretary Jack Lew told congressional leaders Wednesday that the federal government’s debt limit will be reached no later than Oct. 17.
At that point, the Treasury would have only about $30 billion in cash to pay the government’s bills, including repayment of previously issued debt.
In a letter to House Speaker John Boehner and the other congressional leaders, Lew urged Congress to immediately extend the government’s borrowing authority in order to avoid default. Lew’s warning comes as Congress is struggling to meet a separate deadline – Monday – for passing a new spending bill to keep funding government operations and avoid a partial shutdown.
The spending bill and the debt limit are separate issues and will require two votes by Congress.
Some congressional Republicans want to attach a one-year delay in the implementation of the Affordable Care Act or Obamacare to the bill to lift the debt limit; House Republican leaders are also weighing the idea of attaching to the debt limit bill energy-related provisions such as approval of the Keystone XL pipeline. But Lew said Obama “will not negotiate over whether the United States will pay its bills for past commitments.”
Lew said on some days the government must spend as much as $60 billion, so if it were forced to rely solely on daily cash flow from tax payments it would be “impossible” for the government “to meet its obligations for the first time in our history.”
In his letter, Lew also criticized a bill passed by the House which would attempt to pay some bills – such as repayment of debt – before others. “Any plan to prioritize some payments over others is simply default by another name,” Lew said. “The United States should never have to choose, for example, whether to pay Social Security to seniors, pay benefits to our veterans, or make payments to state and local jurisdictions and health care providers under Medicare and Medicaid.”
The government’s automated payment system electronically pays about 80 million bills every month. Experts have warned of the administrative and bookkeeping challenges of trying to prioritize some payments over others.
Lew’s letter reprises the arguments made by his predecessor, Tim Geithner, in the summer of 2011 when GOP congressional leaders were locked in a struggle with President Barack Obama over increasing the government’s borrowing limit.
That impasse was settled when Obama agreed to sign the Budget Control Act which has imposed spending cuts, mostly in non-entitlement spending.
The Standard & Poor’s rating agency presciently warned back in 2011 that “there is an increasing risk of a substantial policy stalemate enduring beyond any near-term agreement to raise the debt ceiling.”