Treasury Secretary Jacob J. Lew said the U.S. risks breaching the federal debt limit by the end of this month and called on Congress to raise it immediately to sustain economic momentum.
“It is imperative that Congress move right away to increase our borrowing authority,” Lew said in a remarks prepared for a speech at the Bipartisan Policy Center in Washington today. “It would be a mistake to wait until the 11th hour to get this done.”
The U.S. economy is “poised for growth in 2014” and Congress should avoid another “manufactured crisis” over the debt ceiling, Lew said. “Simply delaying action on the debt limit can cause harm to our economy, rattle financial markets, and hurt taxpayers.”
The debt ceiling was suspended through Feb. 7 under an agreement between President Barack Obama and congressional Republicans in October. The Treasury Department uses so-called extraordinary measures, or accounting maneuvers, stay under the ceiling.
Lew said some measures that the Treasury has previously used to remain under the debt limit aren’t available this time.
“In February, the same large trust fund investments that were deferred last year are not available, and at the beginning of tax filing season, tax refunds result in net cash outflows that deplete borrowing capacity very quickly,” he said. “We now forecast that we are likely to exhaust these measures by the end of this month.”
He said that no administration should have to “pay a ransom so that the United States can pay its bills. Presidents from both political parties have always stood firm on the importance of protecting the full faith and credit of the United States. We should never put this precious asset in jeopardy.”
Threatening a U.S. default is “not an acceptable way to deal with the debt limit,” Lew reiterated today.
The Senate’s third-ranking Republican last week predicted that his party may provide enough votes to raise the limit in February without conditions, such as defunding Obamacare, that members sought in the past.
“I suspect that with Democrats, there are probably enough Republicans in the Senate that would vote for a clean debt limit increase,” South Dakota Senator John Thune said Jan. 31. He said he hadn’t conducted a formal vote count.
Lew said bipartisan agreements reached lately on the budget and the farm bill show Congress is able to handle issues that are crucial for the U.S. economic expansion. He listed an overhaul of the immigration system, investments in infrastructure and changes in business taxes among areas of potential agreement in the near future.
Lew said he’s more optimistic about the long-term fiscal outlook partly because of a recent improvement in the nation’s budget balance. The deficit has been reduced by more than half since reaching a record $1.42 trillion in 2009.
“When you look at the next 10 years, we’re on a very good path,” Lew said. “We’re seeing the deficit drop rapidly.”
The Congressional Budget Office is scheduled to release its 2014-2024 budget and economic projections tomorrow.