Secretary Lew Talks About The Debt Limit
This morning, Secretary Lew spoke at the Bipartisan Policy Center about the imparative need to raising the debt ceiling, which has been suspended and is reinstated on February 7. At that point, the limit will be $17.3 trillion, according to estimates from the Bipartisan Policy Center.
At that time, the Treasury Department would have to begin use of a limited amount of accounting tools at their disposal, called extraordinary measures, to avoid defaulting on their obligations. However, even with such measures, the Treasury Department estimates that they will only be able to continue paying the nation’s bills until late February, by which point the debt ceiling would need to be raised.
Watch the event here:
Secretary Lew estimated that the extraordinary measures will only last through late February, stating:
Unlike other recent periods when we have had to use extraordinary measures to continue financing the government, this time these measures will give us only a brief span of time before we run out of borrowing authority. In February, the same large trust fund investments that were deferred last year are not available and at the beginning of tax filing season, tax refunds result in net cash flows that deplete borrowing capacity very quickly. We now forecast that we are likely to exhaust these measures by the end of the month.
If policymakers do not raise the debt ceiling by that point, the government must rely on its remaining cash on hand and incoming receipts to pay all obligations. Since the government is running annual deficits, incoming revenues to the federal government are insufficient to cover all of the government’s obligations, and some of the government's bills would not be paid on time, threatening the full faith and credit of the United States.
On the importance of raising the debt limit, Secretary Lew stated "It's imperative that Congress move right away to increase our borrowing authority. It would be a mistake to wait until the eleventh hour to get this done...The bottom line is time is short. Congress needs to act to extend the borrowing authority and it needs to act now." He went on to add "The longer we wait, the greater the risks become. Whether it's the economic recovery, the financial markets, or the dependability of social security payments and military salaries, these are not things to put at risk."
Want more information? See our short Q&A: Everything You Should Know About the Debt Ceiling.