By Peter Schroeder - 12/19/13 04:45 PM EST
Congress will need to raise the debt limit no later than early March, according to Treasury Secretary Jack Lew.
In a letter sent to Congress Thursday, Lew warned that he does not see any “reasonable scenario” in which the Treasury can buy more than just a few weeks of time after the debt limit is reached on Feb. 7.
As a result, Congress must raise the debt limit as soon as possible, he warned, to avoid default on a payment.
Lew noted that Congress just managed to strike a rare compromise and pass a bipartisan budget agreement. He urged lawmakers to keep up the productive streak and raise the debt limit “at the earliest possible moment.”
The debt limit was suspended as part of the deal to end October's government shutdown, but on Feb. 7 it will automatically be raised to cover spending since the suspension. That leaves the Treasury to again employ its arsenal of “extraordinary measures” to ensure the government makes all its payments on time.
During the last debt-limit standoff, those measures provided Congress with several months of time to debate another boost before the danger of a default. But this time around, Lew warned that the measures will be far less effective, giving lawmakers a much narrower window to work with.
One important reason the measures will be less effective is the time of year.
During the first few months of the year, the government typically sends out much more money than it brings in. The government sends out most tax refunds in the early months of the year, but tends to not receive significant revenue from taxes until closer to April, when tax returns are due.
Lew said those “large net cash outflows” mean the government would be in danger of missing a payment on its debts sometime in late February or early March.
With a two-year budget agreement in place and the threat of a government shutdown apparently subsiding, both parties have turned their attention to the debt limit as the next fiscal battleground. Both sides are already staking out the same positions they held during the last fight.
Rep. Paul Ryan (R-Wis.), who helped craft the budget deal, said Republicans would be looking to extract fiscal concessions in exchange for a borrowing boost, and Senate Minority Leader Mitch McConnell (R-Ky.) said this week he could not envision the Congress passing a “clean” debt limit increase without concessions from Democrats.
Meanwhile, the White House has reiterated its stance during the last debt-limit debate, which is that the matter is too important to be debated and that the president is unwilling to negotiate over it. Lew echoed that message in his letter.
“The creditworthiness of the United States is an essential underpinning of our strength as a nation; it is not a bargaining chip to be used for partisan political ends,” he warned.