October 15, 2015
The Honorable John A. Boehner
U.S. House of Representatives
Washington, DC 20515
Dear Mr. Speaker:
I am writing to
follow up on my previous letters regarding the debt limit and to provide
additional information regarding the Department of the Treasury’s ability to
continue to finance the government.
On October 1, I
wrote to inform you that the extraordinary measures we have been employing to
preserve borrowing capacity likely would be exhausted on or about Thursday,
November 5. The letter noted,
however, that Treasury’s estimates are subject to inherent variability and
could change as we receive additional information. It is impossible to forecast thousands of
daily government transactions with precision.
The letter also noted that the trend in our projected net resources had
been negative in late September, which had reduced the projected amount of time
we could finance the government.
Accordingly, I cautioned that the ultimate date that Treasury exhausts
extraordinary measures could be sooner or later than November 5.
Over the past two
weeks, Treasury has continued to receive information about daily receipts,
investments, and expenditures. The trend
in our projected net resources has continued to be negative, and our
projections for the relevant period have declined an additional $4-6
billion. Based on our best and most
recent information, we now estimate that extraordinary measures will be
exhausted no later than Tuesday, November 3.
At that point, we expect Treasury would be left with less than $30
billion to meet all of the nation’s commitments—an amount far short of net
expenditures on certain days, which can be as high as $60 billion.
Operating the United
States government with no borrowing authority, and with only the cash on hand
on a given day, would be profoundly irresponsible. As I wrote previously, we anticipate that a
remaining cash balance of less than $30 billion would be depleted quickly. In fact, we do not foresee any reasonable
scenario in which it would last for an extended period of time. The government makes approximately 80 million
payments a month, including Social Security and veteran benefits, military
salaries, Medicare reimbursements, and many others. In the absence of congressional action,
Treasury would be unable to satisfy all of these obligations for the first time
in the history of the United States.
In recent letters, I
also have cautioned that Treasury’s cash balance already has fallen below a
minimum prudent level of $150 billion.
Maintaining this minimum balance helps protect against potential market
interruptions, which in the past have been caused by events such as Hurricane Sandy
and the 9/11 terrorist attacks. It does
not increase the debt limit or alter the time we can continue to pay the
nation’s bills. Treasury’s cash balance
is now substantially below that minimum level.
of the United States is an essential component of our strength as a
nation. Protecting that strength is the
sole responsibility of Congress, because only Congress can extend the nation’s
borrowing authority. Moreover, as you
know, increasing the debt limit does not authorize any new spending. It simply allows Treasury to pay for
expenditures Congress already has approved, in full and on time.
For these reasons, I
respectfully urge Congress to take action as soon as possible, raise the debt
limit without delay, and remove an unnecessary threat to our economy. We have learned from the past that failing to
act until the last minute can cause serious harm to business and consumer
confidence, raise short-term borrowing costs for taxpayers, and negatively
impact the credit rating of the United States.
And there is no way to predict the irreparable damage that default would
have on global financial markets and the American people.
Jacob J. Lew
Identical letter sent to:
Honorable Nancy Pelosi, House Democratic Leader
Honorable Mitch McConnell, Senate Majority Leader
Honorable Harry Reid, Senate Democratic Leader
Honorable Paul Ryan, Chairman, House Committee on Ways and Means
Honorable Sander M. Levin, Ranking Member, House Committee on Ways and Means
Honorable Orrin G. Hatch, Chairman, Senate Committee on Finance
Ron Wyden, Ranking Member, Senate Committee on Finance
Members of the 114th Congress