|US Treasury running out of breathing room to borrow
The US will hit its statutory debt ceiling in mid-October, raising the chance that the government will be forced to default on debts, Treasury Secretary Jacob Lew said Monday.
In a letter to Congress, Lew urged legislators to raise the limit from the current US$16.7 trillion, saying to not do so “would cause irreparable harm to the American economy.''
The treasury has been operating under the ceiling since it reached that level on May 17, helped by “extraordinary measures'' to manage expenditures, and a surge in tax receipts above forecasts, AFP reports.
However, Lew said, the latest estimates point to that breathing room being exhausted around the middle of October.
“At that point, the United States will have reached the limit of its borrowing authority, and treasury would be left to fund the government with only the cash we have on hand on any given day.''
That “would place the United States in an unacceptable position,'' Lew said, unable to serve rising commitments to issue payments for health and retirement needs and not able to pay the required salaries.
Moreover, he warned, if investor demand for US government debt declines, the country could face an immediate cash shortfall.
“Indeed, such a scenario could undermine financial markets and result in significant disruptions to our economy.''
Lew said it was not possible to pinpoint the exact day treasury commitments would exceed its funds.
But, he said, “Under any circumstance... Congress must act before the middle of October.''
Lew's comments were in a letter addressed to John Boehner, the Republican speaker of the House of Representatives.