US President Barack Obama’s administration warned the US Congress on Friday the federal government could start missing payments on its bills soon after Feb. 27 if lawmakers do not raise a limit on public borrowing.
In a letter to congressional leaders, US Treasury Secretary Jack Lew said accounting measures aimed at staving off default would only buy about three weeks worth of time.
By Feb. 27, when the measures are exhausted, the US government anticipates having about US$50 billion in cash and would rely on this and incoming revenue to pay its bills. The money would not last long.
“Any foreseeable cash balance would be exhausted quickly,” Lew said in the letter.
It would then “be impossible for our nation to meet all of its obligations,” he added.
The US runs budget deficits in a peculiar way. Congress authorizes spending, but separately approves enough borrowing to pay its obligations, which include everything from Social Security pensions to interest payments on the federal government debt.
Since 2011, lawmakers have regularly balked at raising the borrowing ceiling amid a debate in Washington over the government’s long-term fiscal health, with Democrats and Republicans at odds over the need for tax hikes versus spending cuts. Gridlock over the debt ceiling several times has left the nation perilously close to default, riling financial markets.
This year, some Republicans again have vowed to extract policy concessions from Democrats before allowing the debt limit to rise, although Republican party leaders have appeared undecided over whether they will indeed demand conditions.
Republicans, who have a majority in the US House of Representatives, but not in the Senate, have penciled in a possible vote on the borrowing cap for next week in the House.
In October, Congress and the administration suspended a US$16.7 trillion cap on borrowing until Feb. 7.
Lew has said that the end of this month is a particularly bad time to start relying on a cash cushion. Late this month is when the government is starting to mail out tax refunds, so the Treasury could burn through its remaining cash more quickly than it would at other times of the year.
In his letter, Lew said that uncertainties over the size of tax refunds made it unclear exactly how much cash would be left in government coffers at the end of the month, something that could leave the Treasury with “materially higher or lower” cash reserves.
“I respectfully urge Congress to move as quickly as possible [to] raise the debt limit,” he said.