Smart. Sharp. Funny. Fearless.
Monday, January 21, 2019

WASHINGTON (AFP) – The U.S. will hit its statutory debt ceiling in mid-October, raising the chance that the government will be forced to default on its debts, Treasury Secretary Jacob Lew said Monday.

In a letter to Congress, Lew urged legislators to raise the limit from the current $16.7 trillion, saying to not do so “would cause irreparable harm to the American economy.”

The Treasury has been operating under the ceiling since it reached that level on May 17, helped by “extraordinary measures” to manage expenditures, and a surge in tax receipts above forecasts.

However, Lew said, the latest estimates point to that breathing room being exhausted around 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.”

That “would place the United States in an unacceptable position,” Lew said, unable to serve rising commitments to issue payments for health and retirement needs and not able to pay the required salaries.

Moreover, he warned, if investor demand for U.S. government debt declines, the country could face an immediate cash shortfall.

He added: “Indeed, such a scenario could undermine financial markets and result in significant disruptions to our economy.”

Lew said it was not possible to pinpoint the exact day Treasury commitments would exceed its funds.

But, he said, “Under any circumstance… Congress must act before the middle of October.”

Lew’s comments were in a letter addressed to John Boehner, the Republican speaker of the House of Representatives.

It came as the White House and both parties in Congress gird for yet another battle over spending that will conflate the debt ceiling and the U.S. budget.

In repeated battles over the past two years Republicans have stalled increases in the debt ceiling to extract commitments to cut spending from President Barack Obama’s Democrats.

The fight in July-August 2011 took the country to the brink, poised between defaulting on obligations to U.S. citizens or defaulting on foreign debt.

While that fate was averted in a last-minute deal, the budget fight was not resolved and Standard & Poor’s dealt the country the first-ever downgrade of its top-flight debt rating.

Lew evoked that scenario again in his letter to Boehner.

“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,” he explained.

He also said: “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.”

  • Share this on Google+0
  • Share this on Linkedin0
  • Share this on Reddit0
  • Print this page
  • 0

2 responses to “U.S. To Hit Debt Ceiling In Mid-October”

  1. Dominick Vila says:

    It should be obvious to everyone by now that debt ceiling exercises are part of our fiscal process, and that until our expenditures are consistent with our government’s revenues they will continue forever. The problem has little to do with the decisions made by each party, and a lot to do with our demands to ensure our tax rates remain ridiculously low, compared to those in other industrialized nations, and our national security and domestic programs remain intact. That will never work. There are no free rides in life.
    We either pay for what we want and need, or start shutting down the programs we depend on for our survival as the pre-eminent military and economic superpower in the world.

  2. latebloomingrandma says:

    Here we go again. Speaker Boehner seems incapable of whipping his caucus into shape to do the right thing for the country. Bring back Pelosi ! She could get things done. My fear is that we’re stuck with the status quo for the next 8 years.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.