Lew Urges Congress to Focus on February Debt-Limit DeadlineKasia Klimasinska and Ian Katz
U.S. Treasury Secretary Jacob J. Lew said Congress should raise the federal debt ceiling as soon as possible and assume that the so-called extraordinary measures used to stay under the limit will run out in late February.
“We get into a kind of Washington parlor sport of trying to figure out the precise moment when is the last minute” to raise or suspend the debt limit, Lew said today at an event in Washington hosted by the Council on Foreign Relations. “The buildup to the last minute causes damage.”
If Congress were to wait until extraordinary measures are exhausted, it should “be looking more at the end of February than any time in March,” Lew said.
The Obama administration and Congress could be headed toward another face-off on the debt ceiling. The last one ended Oct. 17, the day Lew had said the U.S. would exhaust its borrowing authority. President Barack Obama signed legislation to suspend the limit until Feb. 7 and end a 16-day partial government shutdown.
The February deadline is a “key date” for the nation’s AAA credit rating, Fitch Ratings said this week. Republicans have yet to determine what they want in exchange for agreeing to raise the limit.
The U.S.’s shrinking budget deficit is a positive factor for the nation’s Aaa credit rating, according to Moody’s Investors Service. A shortfall that’s falling more quickly than the government expected is “a credit positive development,” Steven Hess, Moody’s New York-based lead sovereign analyst for the U.S., wrote today in a report.
Lew said the U.S. is starting the year with economic “tailwinds,” while there’s “more to do” to maintain growth.
“The trend of economic statistics, job statistics, confidence, has been strong, it’s been strong across sectors, and there is potential for more growth in a number of key areas,” he said.
Lew also urged Congress to approve an extension of unemployment benefits. December’s slowdown in job growth doesn’t signal a fundamental change in the direction of the economy, he said. Employment rose in December at the slowest pace in almost three years, in part because bad weather blanketed the U.S.
The Federal Reserve yesterday said “moderate” growth across most of the country last month was buoyed by gains in holiday spending by consumers, an improving labor market and strength in manufacturing.
Retail sales increased more than forecast in December, Commerce Department figures showed this week. Excluding a drop in auto demand that vehicle makers partly attributed to bad weather, sales jumped by the most in almost a year.
Consumers are getting a boost from the stock market. The Standard & Poor’s 500 Index climbed 30 percent last year for its best advance since 1997.
Stocks fell today, with the S&P 500 dropping from a record, as corporate earnings disappointed investors. The S&P 500 lost 0.2 percent to 1,844.66 at 10:14 a.m. in New York.
Lew said a budget accord has removed some of the fiscal drag holding back the economy. The House passed a $1.1 trillion bipartisan spending bill to finance the government through Sept. 30, a turnaround from the Tea Party-fueled discord that caused the partial government shutdown in October. The Senate will start considering the measure today with the goal of sending it to Obama.
The measure didn’t include a proposed $63 billion contribution to the International Monetary Fund’s permanent capital fund.
“It is critically important to the U.S. economic well-being that the IMF be strong,” Lew said today. “We made a full-court press to get it done and got close, but didn’t get it done this past week. We’re continuing to stand by our commitment and we will get it done.”
On China, Lew said he is “pretty confident” that the nation’s new leadership is “intent on the path of economic reform that they describe. At the same time, I am not confident about the time frame or which targets of opportunity will be sequenced early in the queue.”
The U.S. is putting “an awful lot of focus on the need for market-determined exchange rates” in China, he said.
Treasury data released this week showed China’s holdings of U.S. government securities rose in November to a record $1.317 trillion.