'Time Is Short' On Debt Ceiling, Treasury Secretary Says
Warning that "simply delaying action on the debt limit can cause harm to our economy," Treasury Secretary Jacob Lew repeated Monday that he believes Congress should act soon to raise that limit so the federal government avoids even looking like it might default on its debts.
"Time is short," Lew also told an audience at the Bipartisan Policy Center, a Washington, D.C.-based nonprofit organization founded by four former Senate majority leaders — Republicans Howard Baker and Bob Dole; and Democrats Tom Daschle and George Mitchell. A transcript of Lew's speech is posted here.
Thanks to an agreement reached last October, the government's ability to borrow to help pay its bills was extended through Feb. 7 — this coming Friday. In a conversation Monday with All Things Considered host Melissa Block, Lew said that Treasury can make adjustments to its accounts that allow the government to keep paying its bills a bit beyond this week — but only through the end of the month at most.
Treasury's ability to use such "extraordinary measures" will then run out, Lew said.
Republican leaders in Congress have said they do not want another showdown over spending or health care such as the one last October that led to a partial shutdown of the government. And Lew said he is optimistic that an agreement to raise the debt limit above its current level — approximately $17.2 trillion — will be reached soon.
But in his conversation with NPR he also pointed to what he believes is the flaw in the argument by some lawmakers that the limit should not be increased unless equivalent spending cuts are made.
"Just a few weeks ago," Lew said, "Congress enacted a budget — a two-year blueprint. Just a few days ago, Congress enacted an appropriations bill pursuant to that two-year budget. Now the question is, will we pay the bills that that budget calls to be racked up? I think that the notion that after Congress passes a budget, to then demand additional budget cuts in order to pay the bills that were already incurred, doesn't make any sense."
A default, he warned, could cause serious damage to the economy by shaking investors' confidence in the ability of the U.S. to pay its obligations.
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From NPR News, this is ALL THINGS CONSIDERED. I'm Audie Cornish.
MELISSA BLOCK, HOST:
And I'm Melissa Block. When will the U.S. Treasury run out of money to pay its bills? Very soon, according to Treasury Secretary Jacob Lew if Congress doesn't vote to increase the debt ceiling. Congress has suspended the debt limit through February 7th; that's this Friday. Treasury can take extraordinary measures to extend the country's borrowing authority past that, but Secretary Lew says time is short to avoid a government default.
And Secretary Lew joins me now from the Treasury Department to talk about that. Welcome to the program.
SECRETARY JACOB LEW: Good to be with you, Melissa.
BLOCK: And let's talk first about the time table. How long do you figure you could use these extraordinary measures to avoid default?
LEW: Well, extraordinary measures have different value at different times of the year and because we're now at a time of year when there are relatively few things that can be deferred and an awful lot of bills to pay, particularly tax refunds that come in February, there will be a much shorter period than people have been accustomed to in the past.
Our current estimates are that at the end of February, we will run out of borrowing capacity, even using extraordinary measures. So that means Congress really has a very short window of time from now until the end of the month to complete action.
BLOCK: Well, you told Democratic senators last week that the White House would not pay ransom, I think, are the words that were used to congressional Republicans. In other words, you wouldn't agree to concessions in exchange for raising the debt limit. But I want to ask you about that because back in 2011, the White House did agree to big spending cuts as part of a deal that did lift the debt ceiling.
So I wonder if now, looking back, you would say that was a mistake, to tie the two things together, that it now sets a precedent. If you did it then, why not do it now?
LEW: Well, since then, we've seen on a number of occasions, Congress has voted to extend borrowing authority without there being any other kinds of policies being attached to it. Let's remember that just a few weeks ago, at the end of last year, Congress enacted a budget, a two-year blueprint. Just a few days ago, Congress enacted an appropriations bill pursuant to that two-year budget, and now the question is will we pay the bills that that budget calls to be racked up.
I think that the notion that after Congress passes a budget to then demand additional budget cuts in order to pay the bills that were already incurred, it doesn't make any sense.
BLOCK: But that is what the White House agreed to back in 2011. So would you say that was a mistake?
LEW: No. In 2011, there was no budget in place. In 2011, you know, we were at a point of substantial disagreement on budget policy and I think that if you look at what happened in 2011 and then in subsequently last year, we were seeing a number of members basically saying if they don't get their way, it would be better to default than to extend the debt limit.
That is no way for the United States to run its business and, frankly, it's not just me saying this. If you look at the leaders of Congress, both Democrat and Republican, almost all of them are acknowledging that Congress has to act to extend our borrowing authority and that they should do it as quickly as possible. And I am very hopeful that they are going to do that in a very short period of time.
BLOCK: That does seem to be the message from House Speaker John Boehner. He has said we should not default on our debt. We shouldn't even get close to it. So how are you reading the signals you're getting from the Republican leadership? Does it seem that they're far less hostile to this than they have been in the past?
LEW: Well, I think that everyone went through last October and saw that the combination of the government shutdown and the near default caused an enormous amount of economic volatility and it is not good. The president's been very clear and it is not just a question about this president and this Congress. We can't be in a place where the question of whether or not the United States pays its bills is something that every six or 12 months becomes a kind of demand for concessions because it cannot be a tolerable idea that the United States would not pay its bills. Since 1789, we've always paid all our bills. And this Congress has to do what every other Congress has done and make that possible.
BLOCK: Secretary Lew, if you look at the long-term prospects here, even though annual deficits are shrinking, the U.S. long-term debt is now over 17 trillion dollars. It's about, I think, 73 percent of GDP. How big a problem do you consider that to be?
LEW: Look, I think if you look at the path that we've taken over the last five years, we've reduced the deficit, cut in half. We've stabilized the deficit as a percentage of GDP, kept it coming down and we've stabilized debt as a percentage of GDP. Obviously, there are longer-term issues that the president has spend much time looking at, negotiating with Congress about, but you don't get to the long term if you don't get through the short term in a successful way.
The short term, we're doing very well. We're bringing the deficit down and, frankly, we need to worry more about growing opportunities for Americans to find good middle-class jobs because that's ultimately the path towards the strongest fiscal policy.
BLOCK: I've been talking with U.S. Treasury Secretary Jacob Lew. Secretary Lew, thanks very much.
LEW: Good to be with you, Melissa. Transcript provided by NPR, Copyright NPR.