US Treasury Secretary Jack Lew said on Friday that the government would not feel the pinch from a cap on debt before September, as net new borrowings were to halt this weekend.
“Extraordinary measures” to sustain the government without being forced to slash spending or default on the debt due to the borrowing limit “will not be exhausted until after Labor Day,” or Sept. 2, Lew told the US Congress.
The US Treasury’s statutory borrowing power — necessary to bridge a large budget deficit that is forecast at US$642 billion for the fiscal year ending Sept. 30 — were to be capped yesterday, by congressional legislation set earlier this year.
The date was set at the beginning of February in a short-term compromise between the White House and Republicans in Congress as the two sides battle over how to reduce the federal budget deficit.
On Friday the debt stood at US$16.7 trillion, up US$300 billion from when the previous ceiling was reached on Dec. 31.
In a letter Lew wrote to US House of Representatives Speaker John Boehner that was released on Friday, he said the Treasury could keep the government going and “pay the nation’s bills” into September, if not longer, helped by special accounting measures and a surprise rise in receipts from taxes and dividends.
The special measures include by adjusting the way the Treasury manages cash and debt flows, for instance by not issuing debt to absorb cash received by the Social Security system.
However, Lew urged Congress to quickly raise the borrowing limit to ensure confidence in the government’s ability to fund itself and pay its creditors.
“Congress should act sooner rather than later to protect America’s good credit and avoid the potentially catastrophic consequences of failing to act before it is too late,” he told Boehner in the letter.
Increasing the debt limit “simply permits the United Sates to honor pre-existing commitments to our citizens, businesses and investors here and around the world,” he said. “These commitments were already approved by Congress, and honoring them is not optional.”
Earlier this week the US Congressional Budget Office estimated that the Treasury could maintain the government under the fresh ceiling as late as November.