WASHINGTON – The U.S. government is getting a new borrowing cap Friday, almost four months after Washington defused October’s government shutdown and debt crisis.
The new cap on borrowing is expected to be about $17.2 trillion. It means Treasury Secretary Jacob Lew will have to employ bookkeeping manoeuvrs to keep the government functioning until Congress further raises the borrowing limit.
In a letter Friday to congressional leaders, Lew warned that he has less manoeuvring room now than he had last year, when such “extraordinary measures” bought five months of time for the government to keep borrowing at the previous $16.7 trillion debt ceiling.
Lew said that he could not be confident that the extraordinary measures would last beyond Feb. 27.
“At that point, Treasury would be left with only the cash on hand and any incoming revenue to meet our country’s commitments,” Lew said. He said the cash on hand will likely total around $50 billion.
He said that IRS payments of tax refunds can total as much as $10 billion to $15 billion on a single day and the government’s total daily expenditures can be as high as $60 billion on certain days.
“If Treasury has insufficient cash on hand, it would be impossible for our nation to meet all of its obligations for the first time in history,” Lew said. Without enough money to meet interest payments on current debt, the government would be forced into a market-rattling default.
Lew said “time is short” especially given that Congress is scheduled to be out of session during part of the next three weeks.
“I respectfully urge Congress to move as quickly as possible, raise the debt limit and provide certainty to the economy and to financial markets,” Lew said.
Lawmakers temporarily suspended the borrowing limit last October in the agreement to end the shutdown. It will be reset at the total amount of debt at close of business on Friday.
Treasury’s first step to create borrowing room under the new cap is to temporarily suspend sales of U.S. Treasury securities to state and local governments. That started Friday at noon.
Raising the limit is needed so that the government, which ran a $680 billion deficit last year, can borrow enough to pay all its bills, including Social Security benefits, interest payments on the accumulated debt and government salaries, among others.
After last year’s 16-day shutdown and accompanying debt battle, Republicans controlling the House are no longer interested in a big fight with President Barack Obama over raising the borrowing cap. Obama knuckled under to GOP demands in 2011 to pair a $2.1 trillion increase in the debt limit with an equal amount in spending cuts, mostly to the Pentagon and domestic agency operating budgets.
But Obama has since refused to negotiate over the debt limit and is insisting that Congress pass a version without GOP add-ons just as Congress gave President George W. Bush several “clean” debt limit increases last decade.
Republicans last year gave Obama two debt increases last year with only modest add-ons, like a provision to force the Senate to pass a budget.
Since GOP leaders like House Speaker John Boehner of Ohio promise to avert a default — but need Democratic votes to pass any increase in the borrowing cap — they may have little choice but to pass a clean measure later this month.
Associated Press reporter Martin Crutsinger contributed to this report.