WASHINGTON — Treasury Secretary Jacob J. Lew implored Congress on Thursday to raise the debt ceiling, warning of potentially severe market and economic repercussions if it does not.
In testimony before the Senate Finance Committee, Mr. Lew stressed that the Treasury Department would run out of “extraordinary measures” to free up cash in a matter of days, likely to be a week from today. At that point, the country’s bills might overwhelm its cash on hand plus any receipts from taxes or other sources, leading to an unprecedented default.
Mr. Lew said that Treasury had no workarounds to avoid breaching the debt ceiling. “There is no plan other than raising the debt limit,” he said. “The legal issues, even regarding interest and principal on the debt, are complicated.”
He also said prioritizing payments to bondholders or others might not be workable, adding that the Treasury would face significant technical issues in trying to rejigger its complicated automated payment systems to pay certain bills but not others. “Our systems were not designed to not pay our bills,” he said.
Some market participants have suggested that Treasury might simply pull the plug on one or more of its payments systems to prevent money from going out, perhaps telling the recipients of that money that it would pay them when possible. But “I don’t believe there is a way to pick and choose,” except on a broad basis, Mr. Lew said.
His strongly worded prepared testimony shed no new light on Treasury’s plans for when its cash might run out. It again urged Congress to act without delay. “Congress alone has the power to act to make sure that the full faith and credit of the United States is never called into question,” Mr. Lew said. “No Congress in 224 years of American history has allowed our country to default, and it is my sincere hope that this Congress will not be the first.”
The debt limit has become tied up in the broader fight over the budget that has led to the shutdown of much of the federal government and the furloughs of hundreds of thousands of workers. The White House has repeatedly said that it would not negotiate over the debt limit, insisting that Congress raise it without any conditions.
But Republicans have sought ways to leverage the debt ceiling, perhaps by attaching to it cuts to entitlement programs or other legislative measures. Some Republicans are contemplating a short-term extension for the debt ceiling, to give legislators more time to negotiate, a Congressional aide said