Lew Warns Congress: Treasury Out of Options on Debt Limit

'If Congress does not act and the U.S. suddenly cannot pay its bills, the repercussions would be serious'

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Evan Vucci / AP

Treasury Secretary Jacob Lew arrives on Capitol Hill to testify before the Senate Banking Committee on May 21, 2013

Treasury Secretary Jacob Lew warned Congress in stark terms Thursday of the economic danger posed by delaying action on raising the debt ceiling.

“Let me be clear. Trying to time a debt limit increase to the last minute could be very dangerous,” Lew told the Senate Finance Committee, according to his prepared remarks. “If Congress does not act and the U.S. suddenly cannot pay its bills, the repercussions would be serious.”

Lew warned Congress of “the potentially catastrophic impacts of default, including credit market disruptions, a significant loss in the value of the dollar, markedly elevated U.S. interest rates, negative spillover effects to the global economy, and real risk of a financial crisis and recession that could echo the events of 2008 or worse.”

As the country approaches Oct. 17, the projected day by which the country’s borrowing limit must be raised in order to pay debt service and spending already authorized by Congress, Lew said lawmakers should not look to the Treasury to use accounting maneuvers to extend the deadline.

“There is no plan other than raising the debt limit,” Lew said.

Sen. Orrin Hatch (R-Utah), the top Republican on the committee, slammedLew for what Hatch said were untrue statements and attempts to stoke panic to serve partisan ends. “It is disconcerting that administration officials are sounding alarms of emerging risks to financial stability arising from the debt limit impasse, while, at the same time, the Financial Stability Oversight Council, which you Chair, has been silent and refuses to tell the American people how it would respond to these risks,” Hatch said, according to a prepared statement.

In his opening statement at the hearing, Finance Committee Chairman Max Baucus (D-Mont) reiterated the administration’s warning of the dire consequences that will follow if the debt limit isn’t raised in time, while echoing calls for civility at a time of highly charged partisan rhetoric.

“I have been here in the Senate for close to 35 years — in Congress going on 39,” he said. “I’ve seen my fair share of partisan fights.  Never in my time here have I seen Washington so angry, so gridlocked or so broken.  It doesn’t have to be that way.”

17 comments
ahandout
ahandout

How's that investigation of the IRS going, Jack.  Take a seat and STFU. 

jmac
jmac

Obviously, Wall Street, the Koch brothers, the Chamber of Commerce and all the big money that funds the Republican party will make sure the debt ceiling is raised.  Even Republicans aren't that stupid.

But that doesn't mean the shut down ends.  The shut down only hurts the average Joe Doe, and they don't care about him even as they've convinced him they fight for him.   Fox makes sure his blinders stay firmly attached.  What's the Matter With Kansas is still the question of the hour.    Will rural America and the south ever see the light of day?  

JohnDavidDeatherage
JohnDavidDeatherage

This paid political announcement is sponsored by the "People for Bigger Government".


jmac
jmac

  "Never in my time here have I seen Washington so angry, so gridlocked or so broken.  It doesn’t have to be that way.”

Yes, as long as gerrymandering means that Republicans are controlled by their extremists it has to be that way.   They want to keep their jobs.   Let's follow California and blindly redraw districts so they  are diverse and mimic America.  


jsfox
jsfox

@JohnDavidDeatherage are your really this fiscally clueless? Paying the bill you have already run up has nothing to do with the size of government. 

JohnDavidDeatherage
JohnDavidDeatherage

@shepherdwong @JohnDavidDeatherage You are correct. Treasury bonds are considered "risk free" for now. What has been in the headlines for a week? Risk of Default.  No investment at risk of default can be considered risk free. This week China and Japan voiced concerns our bonds.

You alluded to balanced budgets in your comment. We had balanced budgets for 3 years during the Clinton administrations. Republicans controlled both houses of Congress during those three years. Clinton and Gingrich achieved those balanced budgets.


barneydidit
barneydidit

@JohnDavidDeatherage @barneydidit @jsfox And actually, I agree John that we really need to address the spending problem, I'm just sick to death of Fox & Co. parading a bunch of Republicans across the screen on an hourly basis, telling us what a terrible job Obama and the Democrats are doing with cutting spending, only to have no real ideas of their own. 

shepherdwong
shepherdwong

@JohnDavidDeatherage "We are running out of our ability to borrow (easily)."

That is patently false. US Treasuries are still the most sought after investment in the world and we are still able to borrow at practically no cost. Republicans may be on the verge of fück!ng that up just like they did our balanced budgets during the George W. Bush Administration but the only thing that prevents us from putting them back into balance and paying down our debt is Republican intransigence on reasonable tax rates.

JohnDavidDeatherage
JohnDavidDeatherage

@barneydidit @JohnDavidDeatherage @jsfox Except for 2-3 years during Clinton & Gingrich, we have run budget deficits for decades.  We are running out of our ability to borrow (easily).   Our outstanding debt has surpassed our GDP.  Interest rates are being held artificially low. When interest rates rise back to normal levels, our ability to pay the interest on the debt will diminished.  Can we, as a nation, live beyond our means indefinitely?  Wouldn't it be better to begin to tackle these problems today than forced to deal with them 5, 10,  20 years from today?


barneydidit
barneydidit

@JohnDavidDeatherage @jsfox What's your point John? As I've said before, pointing out issues is easy, putting forward viable alternatives is the hard part. In the past 30 years, all I've heard from the Republican side of the aisle is that cutting taxes and cutting spending is the solution. Problem is, Reagan cut taxes then increased spending, then increased taxes, followed by George I and II, both of whom increased spending, with one cutting taxes and the other raising them. How ironic is it that the one that was honest enough to admit the need to raise taxes ended up a one term President, while the one that lowered taxes than increased spending-nearly tripling the debt,  got re-elected?

People love to hear politicians talk about cutting spending, but when they talk about cutting something you personally depend upon, then you end up with tea party rallies full of signs that say "keep your government hands off my Medicare".  IE: cut someone else's program.