Treasury Secretary Jacob J. Lew urged Congress to raise the debt ceiling as soon as possible, saying U.S. borrowing authority may not last past Feb. 27.
Extraordinary measures begun by the Treasury to remain under the debt limit “are likely to be exhausted in less than three weeks,” Lew said yesterday in a letter to House Speaker John Boehner, an Ohio Republican.
House Majority Leader Eric Cantor’s schedule for votes for next week includes possible consideration of legislation related to the debt limit. No bill has been introduced.
House Republicans say they want concessions in exchange for raising the debt limit, though they’ve been unable to agree on exactly what. Options include averting cuts in doctors’ Medicare payments and restoring cost-of-living adjustments for military retirees that were reduced in a December budget deal, said three House Republican aides who sought anonymity.
A suspension of the U.S. debt limit, enacted by Congress in October, expired yesterday. Lawmakers haven’t ruled out a debt-limit boost without conditions if Republicans can’t get enough support for a plan.
“It would be a mistake to wait until the last possible minute to act,” Lew said in his letter to Boehner. After the extraordinary measures run out, any “cash balance would be exhausted quickly,” he said.
Congress plans to be out of session the week of Feb. 17 and will return to Washington the week of Feb. 24.
Business groups are encouraging lawmakers to act to raise the debt limit. Democrats including President Barack Obama and Senate Majority Leader Harry Reid of Nevada insist that it be raised without conditions.
“Any default by the federal government on its debts would cause devastating, long-lasting effects for all Americans,” the Business Roundtable, which represents major U.S. company chief executive officers, wrote in a letter to congressional leaders released yesterday.
Taking the government “to the precipice would foster uncertainty, dampen consumer and business confidence, risk higher borrowing costs, and could have immediate consequences for hiring and investment,” wrote Randall Stephenson, chairman of AT&T Inc., and Louis R. Chenevert, chairman of United Technologies Corp.
Stephenson is president of the Business Roundtable and Chenevert leads the group’s tax and fiscal policy panel.
The Treasury Department suspended sales of its state and local government series of non-marketable securities yesterday. The securities, called “slugs,” are sold to states and municipalities so they can comply with U.S. tax laws and arbitrage rules when they have money to invest from their issuance of tax-exempt bonds.
After the extraordinary measures run out, the Treasury will be left with about $50 billion in cash, Lew said.
“That number, however, could be materially higher or lower, depending on the pace of tax refund filings,” Lew said. “In previous years, the Internal Revenue Service has issued as much as $10-15 billion in refunds on a single day and nearly $40 billion in a single week.”
Lew said government expenditures can be as high as $60 billion on certain days.
Insurance against five-year Treasury notes fell to 27.5 basis points yesterday, matching its lowest level of 2014. The value rises with the perceived risk of U.S. debt and falls if it’s deemed a safer investment. One basis point equals $1,000 annually on a contract protecting $10 million of Treasury debt.
The cost of insuring the bonds spiked almost 110 percent in the month before hitting a one-year high of 45.5 basis points on Oct. 4, 2013, as investors grew worried about a U.S. default during the 16-day partial government shutdown.
Republicans haven’t been able to find enough votes for several plans floated in the past week as conditions for raising the debt limit.
Representative Mac Thornberry, vice chairman of the House Armed Services Committee, said Feb. 6 that the idea of restoring military benefits probably wouldn’t be included in a final measure because the change would increase debt.
Other options, since abandoned, included repealing an insurance provision of the Obamacare health-care law and mandating approval of the TransCanada Corp. Keystone XL pipeline.
“Once again, Republican inaction and delay is threatening the full faith and credit of the United States,” House Minority Leader Nancy Pelosi, a California Democrat, said in a statement yesterday responding to Lew’s letter. “There’s simply no reason to play political games with the debt ceiling.”
A debt-limit increase without conditions would need a significant number of Democratic votes.
“We’re still looking for the pieces to this puzzle,” Boehner said Feb. 6, joking that he’d have trouble finding enough Republican votes for a debt-ceiling increase even if sainthood for Mother Teresa were attached.
“We need Democratic support in order to pass it,” he said. “We’ve got broad support in our caucus, but I don’t think we have 218 votes.”