Treasury Secretary Jacob J. Lew warned that the congressional deadlock over the U.S. debt ceiling is “beginning to stress the financial markets,” and failing to raise it by Oct. 17 could put Social Security and Medicare payments at risk.
“Failing to raise the debt ceiling will impact everyday Americans beyond its impact on financial markets,” Lew told the Senate Finance Committee today. Between Oct. 17 and Nov. 1, the U.S. has “large payments to Medicare providers, Social Security beneficiaries, and veterans, as well as salaries for active-duty members of the military. A failure to raise the debt limit could put timely payment of all of these at risk.”
The U.S. government is in the 10th day of a partial shutdown and a week away from the day Lew has said his department will run out of measures to stay below the nation’s limit on borrowing. House Speaker John Boehner, an Ohio Republican, has rejected President Barack Obama’s call to pass a debt ceiling increase without policy conditions.
In his prepared remarks, Lew cited rising yields on short- term Treasuries and measures of stock-market volatility as evidence investors are growing worried about the stalemate in Washington.
Yields on Treasury bills maturing in the second half of October and early November have surpassed the peaks of similar maturities in July 2011, when Congress and the White House were debating a debt-limit increase, Lew said today.
“Trying to time a debt-limit increase to the last minute could be very dangerous,” Lew said. “If Congress does not act and the U.S. suddenly cannot pay its bills, the repercussions would be serious.”
Earlier this week, rates on one-month Treasury bills reached 0.34 percent, the highest since October 2008, while the Standard & Poor’s 500 Index sank to a one-month low.
Lew has said that so-called extraordinary measures -- the accounting moves he’s been using since May to stay below the $16.7 trillion debt limit -- will expire by Oct. 17, leaving him with about $30 billion on hand. Expenditures can be as high as $60 billion on some days, Lew has said.
Lawmakers for the first time yesterday embraced one possible path out of the fiscal impasse, a short-term deal to avoid default, even as they battled over how to make it happen.