Treasury Secretary Timothy F. Geithner said the U.S. will hit the limit on its borrowing capacity by May 16 and could start defaulting on some of its debts about seven weeks later unless Congress acts soon to raise the debt ceiling.
The Treasury Department had estimated that the nation would reach its $14.29-trillion debt limit between April 5 and May 31. But in a letter to congressional leaders, Geithner said new calculations based on projections of income tax receipts showed that the date will be no later than May 16.
The Obama administration is pushing Congress to increase the debt limit for the 76th time since 1962. The nation has never failed to increase the limit, Geithner said.
But Republican congressional leaders, including House Speaker John Boehner, and at least one Democrat, Sen. Joe Manchin III of West Virginia, have said they won’t vote to increase the debt limit unless the move is accompanied by action to address the soaring budget deficit.
“Speaker Boehner has been perfectly clear: The American people will not tolerate an increase in the debt ceiling without serious spending cuts and real reforms to make sure we keep cutting spending,” Boehner spokesman Michael Steel said.
As the date approaches, Geithner warned Congress in a letter Monday that it is risking “unthinkable” consequences if the U.S. no longer can borrow to pay its bills.
“If Congress failed to increase the debt limit, a broad range of government payments would have to be stopped, limited or delayed, including military salaries and retirement benefits, Social Security and Medicare payments, interest on the debt, unemployment benefits and tax refunds,” he wrote.
“This would cause severe hardship to American families and raise questions about our ability to defend our national security interests,” he said.
“In addition, defaulting on legal obligations of the United States would lead to sharply higher interest rates and borrowing costs, declining home values and reduced retirement savings for Americans,” Geithner continued.
“Default would cause a financial crisis potentially more severe than the crisis from which we are only now starting to recover,” he said.
The Treasury Department has the ability to maneuver some of its payments to buy some time, he said. But such “extraordinary measures” would push the deadline only to about July 8.
“At that point, the Treasury would have no remaining borrowing authority, and the available cash balances would be inadequate for us to operate with a sufficient margin to meet our commitments securely,” Geithner wrote.