WASHINGTON — U.S. Treasury Secretary Jack Lew stepped up pressure on Congress to avert a potential default, telling lawmakers in a letter that measures to avoid breaching the debt ceiling will be exhausted on Oct. 17.
WASHINGTON — U.S. Treasury Secretary Jack Lew stepped up pressure on Congress to avert a potential default, telling lawmakers in a letter that measures to avoid breaching the debt ceiling will be exhausted on Oct. 17.
“We estimate that, at that point, Treasury would have only approximately $30 billion to meet our country’s commitments,” Lew said in a letter Wednesday to U.S. House Speaker John Boehner. That projection was revised from last month, when Lew told Congress he expected the Treasury Department would have about $50 billion left to fund the government in mid-October.
Lew’s letter marks the first time he has set a specific deadline and gives lawmakers a target for raising the $16.7 trillion debt limit. Lew and President Barack Obama have said they won’t negotiate on the limit, which is tied to payments and bills the U.S. has already agreed to make. Republicans in Congress want spending cuts to be part of the debt-limit debate.
The $30 billion “would be far short of net expenditures on certain days, which can be as high as $60 billion,” Lew said in the letter. “If we have insufficient cash on hand, it would be impossible for the United States of America to meet all of its obligations for the first time in our history.”
The $30 billion “is enough to cover the Treasury’s cash needs for a couple of weeks, give or take a few days,” said Lou Crandall, chief economist at Wrightson ICAP in Jersey City, N.J.
“Lew is not giving a date for when the Treasury would run out of cash, which is too hard to call this far in advance,” Crandall said. “October 17 is not when default would occur — it is when the countdown to default begins.”
Treasury 10-year note yields traded at almost the lowest level in six weeks amid speculation budget talks risk a government shutdown.
The benchmark U.S. 10-year yield declined two basis points, or 0.02 percentage point, to 2.64 percent at 11:28 a.m. New York time, according to Bloomberg Bond Trader prices. The Standard & Poor’s 500 Index rose 0.2 percent to 1,700.68.
Lew reiterated his position that making payments on some obligations and not others is unworkable. “Any plan to prioritize some payments over others is simply default by another name,” he said.
The Republican-led House could vote as soon as Sept. 27 on a bill to raise the debt cap until Dec. 31, 2014. The bill, expected to save at least $256 billion, would delay Obama’s health-care law for a year and include other Republican priorities, such as approval of the Keystone XL pipeline, increasing means testing for Medicare and cutting government regulations. The administration has said it will not approve legislation that delays the health-care law.
“This is 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,” Michael Steel, Boehner’s spokesman, said in an emailed statement. “And it should remind President Obama that refusing to negotiate with Congress on solutions just isn’t an option.”
The debt-limit bill would encourage offshore energy production, energy production on federal lands and block Environmental Protection Agency greenhouse-gas and coal-ash regulations.
Lew, speaking Tuesday at the Bloomberg Markets 50 Summit in New York, said investor confidence that a deal can be struck to raise the debt limit is “a bit greater than it should be.”
Omair Sharif, a U.S. economist at RBS Securities in Stamford, Conn., said Wednesday he isn’t surprised Lew gave a precise date because “Treasury secretaries in the past have also given dates to inform Congress of when they will exhaust the extraordinary measures and risk default.”
“We’ve been here before,” Sharif said. “We have to get through the political theatrics.”
With assistance from Roxana Tiron in Washington.