U.S. Treasury Secretary Jacob J. Lew urged Congress to raise the debt limit well in advance of a February deadline, calling an increase necessary to preserve the nation’s promise to its creditors.
“There really is no alternative but to raise the debt limit when you need to borrow in order to pay the bills,” Lew said at the Wall Street Journal’s CEO Council conference today in Washington. “The full faith and credit of the United States -- whether it’s bonds or contracts or benefits -- has to be honored.”
Lew said his department can use so-called extraordinary measures, the accounting steps employed to avoid breaching the debt limit, for about a month after next deadline in early February. Those measures were used during a fiscal impasse that culminated in a partial government shutdown last month, a tactic President Barack Obama said later at the same conference was “like a loaded gun” that threatens global economic disruption.
Obama signed legislation Oct. 17, the day Lew said the U.S. would exhaust its borrowing authority, to suspend the debt ceiling until Feb. 7. The deal between Democrats and House Republicans sets the stage for another possible showdown early next year. The president today said he doesn’t expect a repeat of the standoff that brought the country to the brink of a default.
The deadlock also led to creation of a Senate-House conference committee with a Dec. 13 deadline to offer ways to resolve the fiscal disputes between Democrats and Republicans. U.S. lawmakers are at odds over whether ending some tax breaks for wealthier Americans should be part of a deal to replace the automatic spending cuts approved in 2011 that have trimmed funding for defense and domestic programs.
“The challenge of doing something really big is that both sides have to do something really hard,” Lew said. “We’ve made clear that in order to do the kinds of entitlement reforms that are in the president’s budget, it would require moving on tax reform and raising some additional revenue. If that’s not a possibility for the Republicans, then something large is not likely.”
Lew praised the details of a corporate-tax change plan he discussed yesterday with Senator Max Baucus, a Democrat from Montana. Baucus, the chairman of Senate Finance Committee, released a proposal today under which U.S. companies would face a minimum tax on the income they earn around the world, the senator’s most significant proposal to revamp the tax code.
“It shares some significant characteristics with the president’s framework, which I actually think has a certain amount of convergence between Democrats and Republicans,” Lew said. “I look forward to studying the details.”
The Treasury secretary reiterated he is “optimistic” the Volcker rule ban on proprietary trading will be published by the end of this year.
Lew, who visited five Asian nations including Japan and China last week, said he thinks the Chinese leadership is “serious” about opening up the economy.
“I don’t want to suggest that a week or a month from now we’re going to turn around and it will be transformed, but they certainly chartered a direction that is consistent with the things that we have very much encouraged them to think about,” Lew said. “I suspect that we’re going to still be pressing them to move faster.”
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