Treasury Secretary Jack Lew Warns Statutory Debt Ceiling

Treasury secretary says U.S. to hit debt ceiling in mid-October. The US will hit its statutory debt ceiling in midOctober raising the chance that the government will be forced to default on its debts Treasury Secretary Jacob Lew warned Monday.

The debt ceiling was last raised in January. The government can no longer borrow if it is reached.

Mr Lew said that in such a case it will be unable to meet obligations such as pensions, military salaries and Medicare payments.

The country’s borrowing limit is currently capped at $16.7tn (£10.7tn).

“Extraordinary measures are projected to be exhausted in the middle of October,” Mr Lew said in a letter to House Speaker John Boehner and other lawmakers.

“At that point, the US will have reached the limit of its borrowing authority, and Treasury would be left to fund the government with only the cash we have on hand on any given day,” he said.

The cash balance at that time is forecast to be about $50bn, which Mr Lew said, would be “insufficient to cover net expenditures for an extended period”.

He said: “Operating the government with no borrowing authority, and with only the cash on had on a given day, would place the United States in an unacceptable position.” Such a scenario could undermine financial markets and result in significant disruptions to the economy.”

He warned that a delay in raising the limit “would cause irreparable harm to the American economy”.

He explained that if investors become unwilling to loan to the United States, the country could face an immediate cash shortfall.

“Such a scenario could undermine financial markets and result in significant disruptions to the economy,” he said.