Treasury secretary, Jack Lew, has just stated that the U.S. is on the brink of reaching its debt limit. The news puts extreme pressure on Congress to act quickly and raise the current limit of $16.7 trillion.
According to the Jack Lew’s warning, the U.S. will reach its debt limit by mid October.
If Congress doesn’t act soon and fails to raise the limit, there is a risk of a default on US Treasuries and major cutbacks on government spending.
Mr Lew wrote a letter to the Republican speaker of the House of Representatives, John Boehner, stating that Congress has a responsibility to the U.S. to act immediately and remove any threat of default.
Mr Lew said that “failure to meet that responsibility would cause irreparable harm to the American economy.”
He stated:
“Under any circumstance – in light of its schedule, the inherent variability of cash flows and the dire consequences of miscalculation – Congress must act before the middle of October.”
In fact, the Treasury reached the debt limit in May, but has managed to carry out “extraordinary measures” to keep on borrowing.
Michael Steel, Boehner’s spokesman, said in response to Lew’s letter:
“The debt limit remains a reminder that, under President Obama, Washington has failed to deal seriously with America’s debt and deficit.”
Debt limit will not become a political bargaining chip, says Obama
In light of the news, Republicans are calling for a huge cut in public spending. However, Obama said he will not allow the debt ceiling to become a bargaining chip in other political discussions.
White House spokesman Jay Carney, said that “we will not negotiate with Republicans in Congress over Congress’ responsibility to pay the bills that Congress has racked up, period.”
Sander Levin, the ranking Democrat on the House Ways and Means committee, said:
“With just nine legislative days currently scheduled in September, Republicans must return to Congress prepared to move beyond the kind of brinkmanship that undermined our economic recovery two years ago.”