By Jason Lange
WASHINGTON Dec 19 The Obama administration
warned Congress on Thursday that the government could run out of
borrowing authority needed to help pay its bills as soon as
February if lawmakers do not swiftly raise the federal debt
"I respectfully urge Congress to take action to raise the
debt limit at the earliest possible moment," Treasury Secretary
Jack Lew said in a letter to congressional leaders.
Congress passed a two-year budget deal on Wednesday to trim
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 Feb. 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.
But Lew said the department would exhaust these so-called
extraordinary measures sometime between late February and early
March. After then, it would no longer be able to borrow to cover
"While this forecast is subject to inherent variability, we
do not foresee any reasonable scenario in which the
extraordinary measures would last for an extended period of
time," Lew said.
Once it loses the ability to borrow, Treasury would pay its
bills by relying on incoming revenue and any cash left in public
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
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.
In November, the Congressional Budget Office estimated the
Treasury might be able to stave off defaulting on obligations
next year until as late as June, depending on the strength of
tax receipts. Some private sector analysts have also said the
government could stretch its cash until around then.
But the Treasury is holding firm that borrowing authority
will expire no later than early March.
A senior official said the Treasury's cash flow estimates
for next year include the possibility that government revenues
might be boosted by higher revenues due to faster economic
growth or dividend payments from housing finance firms that are
controlled by the government.