21 July 2024

Treasury Department To Exhaust Borrowing Capacity By October 17

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In a letter to Congress, U.S. Treasury Secretary Jack Lew said that the United States will hit its debt ceiling limit no later than October 17th and exhaust its borrowing capacity.

"If the government should ultimately become unable to pay all of its bills, the results could be catastrophic," Lew’s letter read. The U.S. would have only about $30 billion cash available after October 17th. Previously, the U.S. Treasury said it expected to have $50 billion in cash on hand when it hit the debt ceiling. The updated estimate reflects fresh information on quarterly tax receipts and the activities of certain large government trust funds.

Lew’s forecast puts pressure on Congress to make a decision about raising the debt ceiling from $16.7 trillion and keep the government funded beyond the start of the fiscal year on October 1.

The government has been bumping up against the debt ceiling since May, but it has not defaulted on any obligations. It has taken emergency measures to manage its cash, such as suspending investments in pension funds for federal workers.

Congress is divided on how to extend the Treasury’s borrowing ability. The Republican-controlled House of Representatives used the debt ceiling to get concessions from Democrats in 2011. Republicans are looking for votes to defund to Obama's Affordable Healthcare Act in exchange for their vote to up the debt limit and avoid a government shutdown.

President Barack Obama has said he will not negotiate with Republicans on extending the Treasury's borrowing capacity and Democratic lawmakers are pushing for a clean debt limit raise.

A spokesman for Republican House Speaker John Boehner said Lew's warning was "another reminder that we need to work together soon on a bill that raises the debt limit and deals with causes of the debt by cutting Washington spending and increasing economic growth."

"It should remind President Obama that refusing to negotiate with Congress on solutions just isn't an option," Boehner's spokesman Michael Steel said.

Lew also warned that a repeat of the brinkmanship over the debt limit seen in 2011, which led to a downgrade in the United States' pristine credit rating, would inflict even more harm on the economy now.

"If the government should ultimately become unable to pay all of its bills, the results could be catastrophic," he said.

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