Treasury Secretary Jack Lew announced that in advance of the debt ceiling’s reinstatement on Monday he is planning on taking steps, now routine, to avoid a default on U.S. debt.
In a letter addressed to House Speaker John Boehner and other congressional leaders, Lew said that he was planning to declare a “debt issuance suspension period” on Monday, an action that will allow him to withhold Treasury securities from some government accounts, thereby creating space under the debt ceiling.
After being suspended last year at $17.2 trillion, the federal debt ceiling is set to be reinstated Monday at a new level of roughly $18.1 trillion. At that point, the government will immediately be at the limit, meaning that the Treasury cannot issue new debt to pay for obligations without freeing up debt elsewhere through extraordinary measures.
Lew called on Boehner to raise the debt ceiling immediately in Friday’s letter, anticipating a showdown with congressional Republicans. President Obama and Republicans have engaged in bruising battles over the terms of raising the debt ceiling in past instances.
“The creditworthiness of the United States is not a bargaining chip, and I again urge Congress to address this matter without controversy or brinksmanship,” Lew wrote.
Lew’s letter was the second sent in a week. Previously, he advised that he was suspending special-purpose Treasury securities used by states and towns to create space under the debt ceiling.
The two measures announced Friday are two of the largest extraordinary measures at Lew’s disposal, buying the Treasury potentially months of time before it is faced with the possibility of missing a payment on the interest on the debt or other obligation.
One, stopping investments in a federal employee savings plan comprising Treasury securities, will save about $194 billion under the debt ceiling, according to the Bipartisan Policy Center.
The other, delaying investments in the civil service and postal retirement funds, will create roughly $140 billion in space under the ceiling.
Altogether, the Treasury has enough ability to delay intra-government payments or shift funds around government accounts under the debt ceiling to make all payments through sometime in October or November, the Congressional Budget Office estimated earlier this month.
