Congress must raise the nation’s debt limit by Nov. 5 or the federal government risks running out of money to pay all its bills, Treasury Secretary Jacob J. Lew warned lawmakers Thursday.
The new deadline, more specific than earlier estimates, sets up a potential showdown between congressional Republicans and the White House amid a broader debate over government spending.
Congress narrowly avoided a partial federal government shutdown Wednesday, passing a spending bill that will expire Dec. 11. The debt limit likely will be part of negotiations over a longer-term spending bill that must be passed before then.
Some Republicans want concessions from the Obama administration before raising the debt limit, but administration officials have said they won’t negotiate over the issue because the debt limit involves borrowing for spending already approved by Congress.
Failure to strike a deal would risk a first-ever federal government default and could endanger the U.S. credit rating.
“Protecting the full faith and credit of the United States is the responsibility of the United States Congress,” Lew wrote in a letter to House and Senate leaders. “There is no way to predict the catastrophic damage that default would have on our economy and global financial markets.”
The nation hit its $18.1 trillion debt limit in March. Since then, the Treasury Department has been using accounting maneuvers that it calls extraordinary measures to extend the government’s borrowing ability and maximize its cash on hand.
Lew had estimated this summer that the Treasury would be able to continue borrowing at least through late October.
Over the last 10 days, that figure has been updated as the Treasury Department received quarterly corporate and individual tax payments, he said.
The tax payments were less than had been projected and some government trust funds made larger-than-anticipated investments, reducing the money available to the Treasury, Lew said.
“Based on this new information, we now estimate that Treasury is likely to exhaust its extraordinary measures on or about November 5,” Lew wrote.
At that point, the Treasury would no longer be able to borrow and would only have about $30 billion in cash on hand, he said. Daily expenditures can be as high as $60 billion.
A standoff over raising the debt limit in 2011 led Standard & Poor’s to downgrade the U.S. credit rating from AAA, the first-ever such move. The limit was raised at the last minute, avoiding a potential default, but the close call caused financial market turmoil.