When Treasury Secretary Jacob J. Lew told the Senate Finance Committee last week that the Obama administration would never bargain over raising the nation’s debt limit, it was a declaration the lawmakers had heard before.

Lew, the administration’s point man for pressing Congress to increase the $16.7 trillion debt ceiling, has been making the same case privately on Capitol Hill for months, lawmakers say, as he has publicly in speeches and on Sunday talk shows. His determination to stay on message has frustrated Republicans hungry for a deal.

He’s “an implacable negotiator” who is “ideologically committed to protecting every big-government gain,” Senator Jeff Sessions, an Alabama Republican, said in an interview. Administration officials “can all go and play a round of golf, and they know he’s not going to agree to anything.”

Lew, 58, has led President Barack Obama’s drive to separate the debt ceiling from other issues that are subject to political deal-making, a position that may change as congressional Democrats and Republicans negotiate how to end the impasse and increase the borrowing limit.

The administration is concerned that protracted negotiations on raising the debt limit to pay bills already approved by Congress will undermine the economy and spur investor doubts about U.S. creditworthiness.

“The full faith and credit of the United States is not a bargaining chip,” Lew told the Senate finance panel at the Oct. 10 hearing in which his testimony varied little from the arguments he’s made over the past two months.

Extraordinary Measures

Lew, who said the administration is willing to negotiate on “the future direction of fiscal policy,” reiterated that so- called extraordinary measures––the accounting moves he’s been using since May to stay below the debt limit––will expire by Oct. 17. That would leave the Treasury with about $30 billion on hand. Expenditures can be as high as $60 billion some days.

Senate leaders yesterday struggled to find a deal to avert a default and end a partial government shutdown that began on Oct. 1. Senate Majority Leader Harry Reid, a Nevada Democrat, said he was having conversations with Minority Leader Mitch McConnell of Kentucky and was confident that Republicans will agree to open the government and raise the debt ceiling. There was little tangible evidence of a breakthrough. Senators plan to reconvene at 2 p.m. today, and the House at noon, with no votes until 6:30 p.m.

‘Unusual Step’

Lew’s approach to the debt limit has focused on a few basic ideas. He has scrapped, temporarily, the traditional Treasury secretary role of cheering up financial markets and is making it clear he thinks investors should be worried about the possibility the U.S. won’t make all its payments on time.

“The calm out there,” he said in a discussion with Bloomberg View’s Al Hunt on Sept. 24, “is a bit greater than it should be.”

That comment was “an unusual step for a Treasury secretary,” said Omair Sharif, an economist for RBS Securities in Stamford, Connecticut. “It shows it’s all hands on deck to get pressure on the Republicans to move to raise the debt limit.”

Senator Ron Johnson, a Wisconsin Republican, said at an Oct. 11 Bloomberg breakfast that the administration should try “to calm the markets, not scare them.”

“Responsible leadership wouldn’t be going out there going, ‘There’s going to be catastrophe coming,’” Johnson said, referring to comments by Obama and Lew warning of dire consequences if the U.S. can’t make all its payments.

Hewing Line

Senators Orrin Hatch of Utah and Rob Portman of Ohio have said deficit-reduction packages over the last 30 years were agreed to within the context of the debt ceiling. By not negotiating, the administration is departing from normal practice, they said.

“He’s hewing to the line,” Hatch said in an Oct. 7 interview. “I’m one who likes Secretary Lew, but to be honest with you he’s been very partisan on all this. He is the most partisan secretary of the Treasury that I’ve seen since I’ve been here.” Hatch became a senator in 1977.

Lew has spoken to or met with at least a half-dozen Republicans in Congress on the debt limit and with the entire Senate Finance Committee in private, according to the Treasury Department. He also attended Obama’s talks with House Republican leaders on Oct. 10 and Senate Republicans on Oct. 11.

At those meetings, he dispenses with small talk and gets “pretty much straight to business,” said Representative James Lankford, an Oklahoma Republican.

Different Deadline

He’s giving Republicans a different kind of deadline than the one provided by his predecessor, Timothy F. Geithner, during talks two years ago that ended with Obama signing a debt-limit increase on Aug. 2, 2011, the day the Treasury projected its borrowing authority would run out.

On Aug. 26, Lew said in a letter to House Speaker John Boehner that the U.S. would run out of extraordinary measures and exhaust its borrowing authority by mid-October, leaving it with a cash balance of about $50 billion.

Congress was on recess at the time and there was a discussion within the administration about whether the letter should wait until lawmakers were back in Washington to focus on the issue, according to a Treasury official who requested anonymity because the conversations were private. Lew decided the information should be released as soon as possible and sent it.

A month later, he gave a precise date, Oct. 17, and revised the projected cash to $30 billion.

‘Code Red’

The difference between choosing a deadline with a $30 billion cushion as Lew did and a date for when Treasury will have no cash is like comparing “code red” with “fiscal Armageddon,” Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey, said last month.

Republicans such as Johnson and Senator Pat Toomey of Pennsylvania question that the U.S. will default if the debt ceiling isn’t raised by Oct. 17. The government, they say, brings in much more revenue than it has to pay out in interest on its debt.

As Lew’s deadline nears, he is facing questions about setting priorities on paying bills and whether the U.S. can avoid default by making some payments and not others.
He dismisses suggestions that setting priorities is a plausible substitute for raising the debt limit.

“It’s just saying that we will default on some subset of our obligations,” Lew told the Finance Committee. “Prioritization is just default by another name.”