The U.S. is likely to exhaust its borrowing authority on the earlier side of what Treasury Secretary Jack Lew had estimated, he said in a letter to Congressional leaders on Wednesday.
Lew warned in the new letter that Congress will likely need to raise the debt ceiling by late February to avoid a potential default on the country’s obligations.
As part of the bill to reopen the government in mid-October, the debt limit was suspended through Feb. 7. The Treasury can use so-called “extraordinary measures” after that point to keep borrowing and paying the nation’s bills for a few weeks thereafter.
“While this forecast is subject to inherent variability, we do not foresee any reasonable scenario in which the extraordinary measures would last for an extended period of time,” Lew wrote in the letter, which was addressed to House Speaker John Boehner (R-Ohio), House Minority Leader Nancy Pelosi (D-Calif.), Senate Majority Leader Harry Reid (D-Nev.), and Senate Minority Leader Mitch McConnell (R-Ky.).
In the letter, Lew urged Congress to raise the debt ceiling before Feb. 7, and “certainly before late February.”
“The Speaker has said that we should not default on our debt, or even get close to it, but a ‘clean’ debt limit increase simply won’t pass in the House,” Boehner spokesman Michael Steel said. “We hope and expect the White House will work with us on a timely, fiscally-responsible solution.”
Lew had said in a December letter to Congressional leaders that the deadline would be sometime in late February or early March. In the new letter, Lew wrote that a unique set of circumstances in February would only provide the Treasury with a few weeks of wiggle room through “extraordinary measures” after Feb. 7.
Lew said that the Treasury’s capacity to use some extraordinary measures is more limited than in 2011 or last year. And there will be significant cash outflows in February due to the payment of tax refunds.
“The significantly smaller amount of headroom that can be freed up now will quickly be exhausted by the large obligations of the government that occur in the month of February,” Lew wrote.
Here’s the full letter:
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