Lew tells Congress of steps to avoid debt default

Treasury Secretary Lew says administration will start procedures to avoid defaulting on debt

Associated Press

WASHINGTON (AP) -- Treasury Secretary Jacob Lew told Congress on Friday that the administration will begin taking steps next week to avoid a default on the nation's debt until Congress votes to raise the government's borrowing limit.

Lew said those measures should provide enough maneuvering room to let the government keep borrowing until after Labor Day. Private economists have estimated that the government will be able to keep from breaching the debt limit until late October or November. In part, that's because the government in recent months has collected more revenue than expected.

Lew repeated the administration's stance that it won't make any policy concessions to Republicans as a price of raising the debt limit. A previous debt standoff in 2011 resulted in a decision by Standard & Poor's to downgrade the government's long-term credit for the first time.

"I want to re-emphasize what the president has said repeatedly," Lew said in a letter to House Speaker John Boehner and other Republican and Democratic leaders. "We will not negotiate over the debt limit."

Lew attached to his letter a list of bookkeeping maneuvers he will use to keep the government below the debt limit. One such move — temporarily suspending the sale of Treasury securities to state and local governments — took effect Friday.

Earlier this year, Congress temporarily suspended the borrowing limit, which stood at $16.39 trillion, so lawmakers could focus on other budget debates. But that suspension ends this weekend. Through its maneuvers, the Treasury Department can keep the government operating for several months.

The government has run up annual deficits in excess of $1 trillion over the past four years. But the Congressional Budget Office this week estimated that this year's deficit will drop to $643 billion. Its estimate reflects increased revenue from an improving economy and the effect of tax increases that took effect in January.

Even if the CBO's estimate proves accurate, this year's deficit would be the fifth-largest ever.

Republicans want to reduce future deficits by cutting back sharply on spending. Democrats have proposed a mix of spending cuts and tax increases, which Republicans oppose. The dispute has led to the current budget impasse.

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