Today, Secretary Lew sent the following letter to Congress regarding the debt limit.
May 17, 2013
The Honorable John A. Boehner
U.S. House of Representatives
Washington, DC 20515
Dear Mr. Speaker:
As provided by Public Law 113-3, the statutory debt limit was suspended by Congress through May 18, 2013. Because Congress has not yet acted to approve normal borrowing authority after May 18, the Treasury Department will begin implementing the standard set of extraordinary measures that enable us, on a temporary basis, to protect the full faith and credit of the United States by continuing to pay the nation's bills. These measures are the same ones that have been used in previous debt limit impasses, and are described in detail in an appendix to this letter.
The effective duration of the extraordinary measures is subject to considerable uncertainty due to a variety of factors, including the unpredictability of tax receipts, changes in expenditure flows under the sequester, and the normal challenges of forecasting the payments and receipts of the U.S. government months into the future. An additional source of uncertainty has been the amount and timing of certain payments to the Treasury by Fannie Mae and Freddie Mac in light of their improving financial conditions. In the case of Fannie Mae, we learned last week that Treasury will receive a payment of approximately $60 billion on June 28, 2013.
Given the uncertainty described above, at this time, Treasury is not able to provide a specific estimate of how long the extraordinary measures will last. However, in view of the forthcoming Fannie Mae payment and the trend in other payment flows, it is now clear that the measures will not be exhausted until after Labor Day. Nevertheless, Congress should act sooner rather than later to protect America's good credit and avoid the potentially catastrophic consequences of failing to act until it is too late.
It is important to note that increasing the debt limit does not increase spending or authorize new spending; rather, it simply permits the United States to continue to honor pre-existing commitments to our citizens, businesses, and investors here and around the world. These commitments were already approved by Congress, and honoring them is not optional. The global economic leadership position enjoyed by the United States rests on the confidence of Americans and people around the world that we are a nation that keeps its promises and pays all of its bills, in full and on time. Breaching that trust would do irreparable harm to the economy and the American public.
In this context, I want to reiterate the Administration's view, expressed in a Statement of Administration Position on May 7, 2013, regarding the so-called prioritization bill passed by the House of Representatives last week. This legislation is unwise, unworkable, unacceptably risky, and would harm the full faith and credit of the nation. The President has indicated he would veto the legislation if it were to reach his desk.
Protecting the full faith and credit of the United States is the responsibility of Congress because only Congress can extend the nation's borrowing authority. No Congress in our history has failed to meet that responsibility. It must be understood that the creditworthiness of the United States is an essential underpinning of our strength as a nation; it is not a bargaining chip to be used for partisan political ends. I want to reemphasize what the President has said repeatedly regarding any threats to cause default in order to extract policy concessions from the Administration: We will not negotiate over the debt limit. The creditworthiness of the United States is non-negotiable. The question of whether the country must pay obligations it has already incurred is not open to debate. Congress has no choice but to protect our creditworthiness and our economy.
The President has proposed detailed plans for reducing our fiscal deficits, and he stands ready to continue working with Congress toward this objective. However, those negotiations are separate from any debate over the debt limit. Therefore, I respectful1y urge Congress to meet its responsibility to the nation by extending normal borrowing authority well before any risk of default becomes imminent. In order to avoid a repeat of the damaging brinksmanship that occurred in 2011, Congress should remove the threat of default by taking this action as soon as possible.
Jacob J. Lew
Identical letter sent to:
The Honorable Nancy Pelosi, House Democratic Leader
The Honorable Harry Reid, Senate Majority Leader
The Honorable Mitch McConnell, Senate Republican Leader
The Honorable Dave Camp, Chairman, House Committee on Ways and Means
The Honorable Sander M. Levin, Ranking Member, House Committee on Ways and Means
The Honorable Max Baucus, Chairman, Senate Committee on Finance
The Honorable Orrin Hatch, Ranking Member, Senate Committee on Finance
All other Members of the 113th Congress
Brandi Hoffine is a Spokesperson for Domestic Finance at the U.S. Department of the Treasury.