Treasury Secretary Jack Lew on Thursday nudged the deadline for raising the debt limit forward a bit, saying the government could be at risk of missing payments at the end of February.
Washington will hit the debt ceiling on Feb. 7, and Lew has warned that the “extraordinary measures” used by Treasury to buy lawmakers more time to make a debt-ceiling deal won't last as long this time.
The $16.7 trillion debt limit was suspended as part of October’s deal to end the government shutdown, and will again take effect in February.
At that point, the limit would be automatically hiked to cover all government borrowing made over that stretch, and the Treasury would immediately begin to employ its time-buying extraordinary measures.
The window on the use of extraordinary measures will close more quickly because the government is readying for tax season, and expect to cut tax refund checks soon. Lew warned that just when the debt limit returns as an issue, the government will be entering a “very unpredictable time” when it comes to cash flow.
The government typically sends out much more money than it sends in at the beginning of tax filing season, and those amounts are impossible to predict as millions of Americans put together their tax returns.
In a letter sent to lawmakers in December, Lew said he saw no “reasonable scenario” in which the government could stay current on its payments longer than a few weeks after Feb. 7. He said the government would face a potential default in late February or early March.
It is not clear yet how much of a fight there will be in Congress over the borrowing cap, but old battle lines are already drawn. The White House has reiterated it will not negotiate over the debt limit, while Republicans already say they will refuse to hike it without concessions.
Some Republicans have called on Lew to lay out exactly how the Treasury would handle a situation where the debt limit is not raised in a timely fashion, and the government would be forced to pick and choose what payments to make and which to miss. They contend that the government could avoid the most damaging aspects of missed payments by prioritizing the critical ones, while allowing more minor ones to slide.
But as he had in the past, Lew dismissed the idea of a backup plan, calling the matter too serious and too complicated for contingencies.
“We are fundamentally hurting our standing as a country,” he said. “I don’t believe that there is any plan that could give that kind of confidence.”
He also dismissed the obsession with tracking exactly how long lawmakers could push a debt limit fight before causing a damaging default. Lew called such calendar-guessing a “Washington parlor sport.” He added that the absolutely final deadline should not even be a topic of conversation: Congress should boost the borrowing cap much sooner than that.