WASHINGTON The Obama administration warned Congress on Wednesday that the government would likely run out of borrowing authority needed to help pay its bills by late February if lawmakers do not swiftly raise the federal debt ceiling.
Previously, the administration had projected the borrowing authority could last until as late as early March, but the Treasury Department said it now believed Congress had a more narrow window in which to act.
"I respectfully urge Congress to provide certainty and stability to the economy and financial markets by acting to raise the debt limit," Treasury Secretary Jack Lew said in a letter to congressional leaders.
Congress passed a two-year budget deal in December to avert some spending cuts planned for next year, and the pact reduces the risk of a government shutdown.
But the legislation does nothing to avoid a potential unprecedented U.S. debt default that could occur if Washington does not raise the borrowing cap soon.
In October, Congress and the administration suspended a $16.7 trillion cap on borrowing until February 7. If the debt ceiling isn't raised by then, Treasury will be able to juggle money between government accounts for a few weeks to keep just under the new limit.
Lew said a late start to the tax filing season, brought about by a partial shutdown of the government late last year, will likely increase the amount of tax refunds the government sends out in February.
He said the department would exhaust its so-called extraordinary measures by late February. After then, it would no longer be able to borrow to cover its expenses.
"We do not foresee any reasonable scenario in which the extraordinary measures would last for an extended period of time," he said in the letter.
Once it loses the ability to borrow, Treasury would pay its bills by relying on incoming revenue and any cash left in public coffers.
After the money runs out, the government could start missing payments on its debt and other obligations, such as Social Security pensions. Many economists think a U.S. default could trigger a financial panic and perhaps even an economic depression.
Heated debates in Washington over the debt ceiling have periodically roiled financial markets since 2011, when the risk of default helped prompt Standard & Poor's to downgrade America's debt rating. Political dysfunction again rattled Wall Street in October.
(Reporting by Jason Lange; Editing by Andrea Ricci)