"I respectfully urge Congress to take action to raise the debt
limit at the earliest possible moment," Treasury Secretary Jack Lew
said in a letter to congressional leaders.
Congress passed a two-year budget deal on Wednesday to trim some
spending cuts planned for next year, and the pact reduces the risk
of a government shutdown.
But the legislation does nothing to avoid a potential unprecedented
U.S. debt default that could occur if Washington does not raise the
borrowing cap soon.
In October, Congress and the administration suspended a $16.7
trillion cap on borrowing until February 7. If the debt ceiling
isn't raised by then, Treasury will be able to juggle money between
government accounts for a few weeks to keep just under the new
limit.
But Lew said the department would exhaust these so-called
extraordinary measures sometime between late February and early
March. After then, it would no longer be able to borrow to cover its
expenses.
"While this forecast is subject to inherent variability, we do not
foresee any reasonable scenario in which the extraordinary measures
would last for an extended period of time," Lew said.
Once it loses the ability to borrow, Treasury would pay its bills by
relying on incoming revenue and any cash left in public coffers.
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After the money runs out, the government could start missing
payments on its debt and other obligations, such as Social Security
pensions. Many economists think a U.S. default could trigger a
financial panic and perhaps even an economic depression.
Heated debates in Washington over the debt ceiling have periodically
roiled financial markets since 2011, when the risk of default helped
prompt Standard & Poor's to downgrade America's debt rating.
Political dysfunction again rattled Wall Street in October.
In November, the Congressional Budget Office estimated the Treasury
might be able to stave off defaulting on obligations next year until
as late as June, depending on the strength of tax receipts. Some
private sector analysts have also said the government could stretch
its cash until around then.
But the Treasury is holding firm that borrowing authority will
expire no later than early March.
A senior official said the Treasury's cash flow estimates for next
year include the possibility that government revenues might be
boosted by higher revenues due to faster economic growth or dividend
payments from housing finance firms that are controlled by the
government.
(Reporting by Jason Lange; editing by Krista Hughes and Philip
Barbara)
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