WASHINGTON -- The Treasury Department on Thursday narrowed the date of a potential national default to Nov. 5.
Earlier estimates for when the nation will hit its legal borrowing limit had been broader. Many lawmakers on Capitol Hill -- who must raise the limit -- had suggested in recent days that it would be closer to Thanksgiving.
The new outlook dramatically raises the pressure on Congress to act. The current borrowing cap stands at $18.1 trillion, and Treasury Secretary Jack Lew had previously warned that the country was already technically at the limit. He had been using certain "extraordinary measures" to keep paying the bills for months.
In a letter to Congress, Lew warned that on or about Nov. 5, the cash on hand in the department's accounts would be down to about $30 billion -- when daily expenses are often around twice that.
"Without sufficient cash, it would be impossible for the United States of America to meet all of its obligations for the first time in our history," Lew wrote.
He also noted that his estimate was not set in stone, and the country could default even earlier than that.
Congress has flirted with defaulting on the debt twice in recent years. The U.S. was placed on credit watches in 2013 and its credit rating was actually downgraded in 2011, largely because many Republican lawmakers wanted to use the limit as leverage to cut spending.
The cap does not, however, do anything to curtail spending. It merely sets how much the Treasury Department can borrow under law to pay the bills that Congress has already racked up through the legislation it passes.
Some in the GOP have argued that rather than raise the borrowing cap, the Treasury Department should pick and chose which bills to pay, and favor paying back the debt and interest on bonds held by foreign and domestic creditors before other items, except Social Security. Rep. Paul Ryan (R-Wis.) recently advanced a bill in his Ways and Means Committee that would do just that.
But Lew and others have repeatedly warned that it would be very difficult, if not impossible, to do this. And, in any case, there would still be obligations the government could not meet.
Democrats have repeatedly criticized the GOP's approach to the debt, saying a bill such as Ryan's would only encourage right-wing lawmakers to flirt with disaster.
House Minority Leader Nancy Pelosi (D-Calif.) said Lew's warning should prompt Republican lawmakers to reconsider, and raise the ceiling soon.
“The credit rating of the United States is not a hostage to serve Republicans’ toxic special interest ideology," Pelosi said in a statement. "Yet time and again, the crisis-addicted Republican majority has threatened to shatter the foundation of our economy to advance their destructive partisan agenda."
“The House Republican majority is now on the clock, and there is no time to waste," said Sen. Chuck Schumer (D-N.Y.). "The full faith and credit of America is hanging in the balance."
Here is Lew's full letter:
I am writing to follow up on my previous letters regarding the debt limit and to provide additional information regarding the Department of the Treasury's ability to continue to finance the government.
In recent letters, I projected that the extraordinary measures we have been employing to preserve borrowing capacity would not be exhausted before late October 2015 and that they likely would last for at least a brief additional period of time. I cautioned, however, that Treasury's estimates regarding the debt limit are subject to inherent variability, given the challenges of forecasting the timing and amount of thousands of daily government transactions.
Over the past ten days, we have received quarterly corporate and individual tax receipts and additional information about the activities of certain large trust funds, including military retirement trust funds. The tax receipts were lower than we previously projected, and the trust fund investments were higher than projected -- resulting in a net decrease of resources available to the United States government.
Based on this new information, we now estimate that Treasury is likely to exhaust its extraordinary measures on or about Thursday, November 5. At that point, we would be left to fund the government with only the cash we have on hand, which we currently forecast to be below $30 billion. This amount would be far short of net expenditures on certain days, which can be as high as $60 billion. Moreover, given certain payments that are due in early to mid-November, we anticipate that our remaining cash would be depleted quickly. Without sufficient cash, it would be impossible for the United States of America to meet all of its obligations for the first time in our history.
Again, Treasury's estimates are subject to inherent variability and could change as we receive additional information about daily receipts, investments, and expenditures. Over the last several weeks, the trend in our projected net resources has been negative, which has reduced the amount of time that we expect to be able to finance the government. The ultimate date that Treasury exhausts extraordinary measures, however, could be sooner or later than November 5. We will continue to update Congress as we receive additional information.
Finally, in my previous letter, I noted that Treasury's cash balance already had fallen below $150 billion. Maintaining this minimum prudent balance helps protect against potential market interruptions, but it does not increase the debt limit or alter the time we can continue to pay the nation's bills. Treasury's cash balance rose temporarily after the September 15 tax deadline.
Today, we anticipate that it will again fall below the minimum balance, and we expect it will continue to fall until Congress raises the debt limit.
Protecting the full faith and credit of the United States is the responsibility of the United States Congress. There is no way to predict the catastrophic damage that default would have on our economy and global financial markets. Moreover, we have learned from previous debt limit impasses that failing to act until the last minute and engaging in partisan brinksmanship can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States. To remove these unnecessary and avoidable threats, I respectfully urge Congress to take action as soon as possible and raise the debt limit well before Treasury exhausts its extraordinary measures.