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.”