Lew Urges Congress to Lift Debt Limit as Boehner Vows No Default

  • Delay in borrowing increase may trigger `accident,' Lew says
  • Boehner says, `We’re not going to default on our debt'

Treasury Secretary Jacob J. Lew urged Congress to act now to increase the U.S. debt limit, calling it irresponsible for lawmakers to use political brinkmanship that could jeopardize the government’s record of honoring its obligations.

Lawmakers should raise the borrowing threshold unconditionally and not use the ceiling as a political weapon, Lew said Wednesday at a conference in Washington. With less than two weeks to meet his deadline, the Republican-controlled Congress needs to move promptly because the process of increasing the debt ceiling is complicated, he said, reiterating that the government on Nov. 3 will exhaust the tools it’s using to stay under the cap.

“My job is to make sure that everyone understands the deadline is very real,” Lew said, adding that, at that point, the government will be operating on cash, which may not be sufficient to cover all expenses on certain days. Going past that date is “irresponsible,” he said.

U.S.'s dwindling cash on hand
U.S.'s dwindling cash on hand

At Lew’s deadline, the Treasury may have less than $30 billion in cash, while net daily expenses can be as high as $60 billion, Lew has said. Under circumstances not constrained by the debt ceiling, the Treasury has a policy of keeping a cash balance of at least five days worth of expenditures, or about $150 billion.

The U.S. debt-ceiling deadlock has already caused disruptions in the Treasury bills market, leading to a shortage of supply. Rates surged in recent days as investors backed away from securities viewed at risk for potential payment delays. Analysts are also concerned the regular sales of three-, 10- and 30-year debt, slated for next month, will be disturbed.

House Republicans discussed options for raising the debt limit at a closed-door meeting on Wednesday as party members remain deadlocked over internal differences.

Targeting Regulations

The chamber may vote Friday on a bill from Representative Bill Flores of Texas that would set conditions for increasing the limit, including freezing all major rules until 2017. Flores, who heads the Republican Study Committee, a caucus of more than 170 conservatives, said the measure is intended to specifically target energy regulations and rules set by the Dodd-Frank banking law and the Occupational Safety and Health Administration.

President Barack Obama and congressional Democrats have insisted that there be no policy changes attached to a debt-ceiling boost.

“The consequences of brinkmanship and waiting until the 11th hour are already upon us,” Charles Schumer of New York, the third-ranking Senate Democrat, told reporters Tuesday. “The yield on Treasury bills is already gone up. People have to pay more for mortgages, people have to pay more for car loans, people have to pay more for student loans.”

House Republican fiscal strategies have been complicated by turmoil within party leadership after Speaker John Boehner announced last month he will step down. Republicans are trying to persuade Ways and Means Committee Chairman Paul Ryan of Wisconsin to run for speaker. Ryan said Tuesday he’d be willing to run if Republicans unify behind him and agree to several other conditions.

Even with the party turmoil, Boehner insisted that there would be no default.

“I have to make clear: We’re not going to default on our debt,” Boehner, an Ohio Republican, told Fox News on Tuesday.

Democrats’ Stance

House Minority Leader Nancy Pelosi and Senate Minority Leader Harry Reid have repeatedly said that Democrats won’t go along with anything but a debt-ceiling increase that’s free of policy conditions. Reid told reporters that separate budget talks aimed at averting a Dec. 11 shutdown are on hold until the debt ceiling bill is passed.

The Obama administration on Tuesday threatened a veto of an alternate House proposal, H.R. 692, that would allow the Treasury to continue borrowing to pay principal and interest on the federal debt and Social Security trust funds. The administration called the measure “default by another name,” and Lew has said the government can’t pick and choose which bills it will pay.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE