WASHINGTON: The Obama administration warned Congress the federal government could start missing payments on its bills soon after February 27, if lawmakers do not raise a limit on public borrowing.
In a letter to congressional leaders, Treasury Secretary Jack Lew said accounting measures aimed at staving off default would only buy about three weeks worth of time. By February 27, when the measures are exhausted, the government anticipates having roughly $50bn in cash and would rely on this and incoming revenue to pay its bills.
The money would not last long, the letter said.
“Any foreseeable cash balance would be exhausted quickly,” Lew said in the letter. It would then “be impossible for our nation to meet all of its obligations,” he added.
The United States runs budget deficits in a peculiar way. Congress authorizes spending but separately approves enough borrowing to pay its obligations, which include everything from Social Security pensions to interest payments on the federal government debt. Since 2011, lawmakers have regularly balked at raising the borrowing ceiling amid a debate in Washington over the government’s long-term fiscal health, with Democrats and Republicans at odds over the need for tax hikes versus spending cuts. Gridlock over the debt ceiling several times has left the nation perilously close to default, riling financial markets.
This year, some Republicans again have vowed to extract policy concessions from Democrats before allowing the debt limit to rise, although Republican party leaders have appeared undecided over whether they will indeed demand conditions. [More]