Treasury Secretary Jacob Lew tried to take the looming fight over the debt ceiling to Republicans on Thursday, challenging them to raise the limit without conditions as soon as they return from thwie August recess.
“I am calling on Congress today to raise the debt ceiling as soon as members get back to Washington after their summer recess,” Lew said in a speech to the Commonwealth Club of California in Mountain View.
Lew warned that the economy might not be able to weather another confrontation over the debt ceiling like the one in 2011, saying “we cannot afford another unnecessary self-inflicted wound.”
The Treasury bumped up against the debt ceiling in May, leaving publicly held debt at just under $16.7 trillion. By law, the Treasury cannot issue debt above that amount without congressional authorization.
Since May, the Treasury under Lew has taken measures to ensure that the federal government meets its obligations without accruing new debt. The Bipartisan Policy Center has estimated that the Treasury will exhaust those options and become unable to make payments on interest on the debt and other bills sometime between mid-October and mid-November. At that point, the government would risk defaulting on its debt, which would destabilize U.S. and world financial markets.
In asking Congress to raise the debt ceiling, the Obama administration has repeatedly said that it will not negotiate over the terms of the increase as it did in 2011. Lew has previously said that “We cannot negotiate whether the U.S. will pay its bills.”
In 2011, the debt ceiling showdown was resolved with the passage of the Budget Control Act, which cut federal spending and ultimately led to the sequestration process that took effect in March. But before the two sides reached a deal, Moody’s downgraded the U.S. government’s credit rating, consumer confidence fell, and economic growth slowed.
For their part, Republicans have indicated they will again insist on spending cuts to go along with any increase in the debt ceiling. House Speaker John Boehner has said that “we’re not going to raise the debt ceiling without real cuts in spending. It’s as simple as that.” He also suggested that the GOP-led House will try to follow the "Boehner Rule," a requirement that an increase in the debt limit be accompanied by spending cuts of an equal dollar amount.
As the Washington Examiner’s Conn Carroll has reported, in recent weeks the Republican House leadership has considered the idea of using the debt ceiling as leverage to delay or defund parts of Obamacare.
The House isn't scheduled to return until Sept. 9.