The federal government will run out of money to pay its bills on Oct. 17 at the latest, Treasury Secretary Jack Lew warned Wednesday in a letter sent to lawmakers asking for a speedy renewal of borrowing authority.
The Treasury Department officially reached the so-called debt ceiling in May and has since been deploying “extraordinary measures,” effectively moving money between accounts and delaying payments to some government retirement accounts. But the ability to move funds around hits the wall around the middle of next month.
“Since August, we have received quarterly corporate and individual tax receipts and additional information regarding the activities of certain large trust funds, including military retirement trust funds. Treasury now estimates that extraordinary measures will be exhausted no later than October 17,” Lew said in a letter sent to House Speaker John Boehner, R-Ohio.
Treasury had sent a letter in August giving a range from the middle to late October for when extraordinary measures no longer would be enough to keep from defaulting on payments to creditors. In Wednesday’s letter, Lew notes that by Oct. 17 at the latest, the government will have only about $30 billion to meet all the expenses the government faces.
“This amount would be far short of net expenditures on certain days, which can be as high as $60 billion,” Lew wrote. “If we have insufficient cash on hand, it would be impossible for the United States of America to meet all of its obligations for the first time in our history. “
Since 1917, raising the debt ceiling has been a frequent task of Congress. Occasionally it was controversial, but since the mid-1990s it’s become a tool by which the major political party out of power tries to wring concessions from the executive branch in exchange for allowing more borrowing to pay bills already incurred, spending that Congress had approved.
This year’s fight is more complicated because Congress and the Obama administration are engaged in a high-stakes game of chicken. Absent the passage of a budget or at least a continuing resolution that provides temporary funding, a federal government shutdown could begin on Oct. 1.
Within weeks of that battle, the debt ceiling must be raised or, as Lew suggested, the U.S. government would be unable to pay all its bills for the first time and would have to choose between foreign owners of U.S. bonds – countries such as China and Japan – and payments to Social Security and Medicare.