WASHINGTON — Congress needs to raise the debt limit before Nov. 5, the date around which the Treasury Department is expected to exhaust the “extraordinary measures” it has been using to preserve the U.S. borrowing capacity, Treasury Secretary Jack Lew told lawmakers.
In identical letters sent to members of Congress on Thursday, Lew urged them “to take action as soon as possible and raise the debt limit well before Treasury exhausts its extraordinary measures.”
The United States reached its statutory debt limit in March and since then Treasury has been using the extraordinary measures to continue to meet its obligations. One of the extraordinary measures is the suspension of sales of State and Local Government Series Securities (SLGS), which muni issuers often purchase for their advance refunding escrows.
In earlier letters, Lew had said that the extraordinary measures would not be exhausted before late October and could last for at least a short amount of time after that. But the tax receipts Treasury received over the last several days were lower than expected, and the investments of certain large trust funds, including military retirement trust funds, were higher than expected, leading to a net decrease in resources available to the federal government, Lew said.
If Treasury exhausts its extraordinary measures and the debt ceiling hasn’t been raised or suspended, Treasury will only be able to fund the government with cash on hand, which Lew said would likely be depleted quickly. “Without sufficient cash, it would be impossible for the United States of America to meet all of its obligations for the first time in our history,” he said.
Lew added that “there is no way to predict the catastrophic damage that default would have on our economy and global financial markets.” When Congress has not acted on the debt limit until the last minute in the past, the brinkmanship has resulted in lower business and consumer confidence, higher short-term borrowing costs and harm to the U.S. credit rating. Congress should raise the debt limit promptly “to remove these unnecessary and avoidable threats,” Lew said.
The top Democrat on the House Ways and Means Committee, Rep. Sander Levin of Michigan, said that Lew’s letter “makes clear what many of us have been saying for some time – Congress must act now to raise the debt limit and eliminate the risk of a catastrophic default on the full faith and credit of the United States.” Levin said that congressional Republicans “need to get their act together – they should not be playing chicken with our country’s full faith and credit.”
