WASHINGTON (AP) — Treasury Secretary Jacob Lew said Wednesday the government will have exhausted its borrowing authority by Oct. 17, leaving the United States just $30 billion cash on hand to pay its bills.
That's a slightly worse financial position than Treasury predicted last month and adds to the pressure on Congress to increase the government's borrowing cap soon to avert a first-ever U.S. default on its obligations.
In a letter to top congressional leaders, Lew warned that a repeat of the debt brinksmanship of 2011 could inflict great harm on the economy and that "if the government should ultimately become unable to pay all of its bills, the results could be catastrophic."
The government reached its $16.7 trillion debt limit in May. Since then, it has been using "extraordinary measures" such as suspending U.S. investments in federal employee trust funds to create about $300 billion in additional borrowing room.
But on the 17th the government will be left with only its cash cushion and daily receipts to pay its bills. Lew warned that before long it would not be able to meet all of its obligations. Economists and financial market experts warn that the stock market could plummet and that investors would demand higher returns on Treasury notes, which could raise interest rates and harm the economy.
Separately, the Congressional Budget Office estimated that the potential default date would come between Oct. 22 and the end of the month. On Nov. 1 the government faces $67 billion worth of payments, including Social Security benefits, pay for active-duty military, and pension payments to federal retirees.
It's generally assumed that Treasury would make sure that the government wouldn't default on Treasury notes held by investors, including foreign countries like China, If it did default on such debt obligations it could be a catastrophe for the economy.
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