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Lew Says Debt-Limit Fight Hurt Economy and Can’t Be Repeated

U.S. Treasury Secretary Jacob J. Lew
U.S. Treasury Secretary Jacob J. Lew said the political drama surrounding the debt limit "was a political crisis, not an economic crisis." Photographer: Pete Marovich/Bloomberg

Oct. 20 (Bloomberg) -- Treasury Secretary Jacob J. Lew said the political drama surrounding the debt limit hurt the U.S. economy and must not be repeated.

“We need to make sure that government does not go through another round of brinkmanship,” Lew said on NBC’s “Meet the Press” program airing today. “This can never happen again.”

Even getting close to the breaching the debt ceiling “does do some damage,” Lew said. “But we have a resilient economy.”

President Barack 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 and end a 16-day partial government shutdown. The 11th-hour deal between Democrats and House Republicans sets the stage for another possible showdown early next year.

“What we just went through was a political crisis, not an economic crisis,” Lew said. “This one was a little bit scary because it got so close to the edge.”

The government closing shaved at least 0.6 percent from U.S. fourth-quarter gross-domestic-product growth, Standard & Poor’s said in a report Oct. 16. Americans in October were the most pessimistic about the nation’s economic prospects in almost two years, as concern mounted that the political gridlock in Washington would hurt the expansion, according to the Bloomberg Consumer Comfort Index of expectations.

Fiscal Health

As Congress hashes out a budget agreement in the wake of the shutdown, it should focus on accelerating economic growth and can build on progress already made in lowering U.S. budget deficits, Lew wrote in an opinion piece published in the New York Times today.

“This is an opportunity to improve our nation’s long-term fiscal health,” Lew wrote, advocating “a comprehensive package that shrinks our deficits, protects Medicare and Social Security for those who rely on it, and expands our economy well into the future.”

Lew, who as Treasury secretary oversees U.S. economic sanctions, told NBC it’s “premature to be talking” about easing measures targeting Iran.

“We need to see that they’re taking the steps to move away from having nuclear weapons capacity,” he said. “We need to see real, tangible evidence of it, and that we will not make moves in the sanctions until we see those kinds of moves.”

Iran Sanctions

Iran is calling on the U.S. and European Union to ease sanctions that have battered its economy. The Western powers are demanding curbs on Iran’s nuclear work, which they say may be a cover for a weapons program. Iran says it has a right to enrich uranium and is interested only in using nuclear technology for peaceful, civilian purposes.

President Hassan Rouhani’s phone call with Obama last month raised expectations of a compromise that would avert the risk of armed conflict over the issue. The U.S. and Israel say they’re ready to use force if diplomacy doesn’t work.

Lew also said he’s confident Obama’s health-care law will be on track to ensure that people who need coverage can get it.

“The huge outpouring of interest shows how important it is that we get this right,” Lew said. “There’s no one more frustrated than the president at the difficulty in the website.’

To contact the reporter on this story: Ian Katz in Washington at ikatz2@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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