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.”