Debt ceiling awaits Congress after summer break

treasury secretary jack lew
Treasury Secretary Jack Lew has yet to give Congress a more precise deadline for raising the debt ceiling.

It's not negotiable: Congress will have to soon raise the debt ceiling. The only question is when.

On Wednesday, the Treasury Department said again that it can continue to pay the country's bills in full without breaching the legal limit on borrowing until sometime after Labor Day.

Nailing down an exact date is hard to do at this time, because of several factors affecting the government's cash flow, according to Matthew Rutherford, assistant secretary for financial markets.

But budget experts forecast that the debt ceiling will likely have to be raised by mid- to late fall because of a better-than-expected fiscal picture.

Indeed, an improving economy, the expiration of tax cuts on high-income families and the across-the-board budget cuts combined with large one-time payments to Treasury from mortgage financing giants Fannie Mae and Freddie Mac have greatly reduced Treasury's need to borrow money.

The debt ceiling now stands at $16.699 trillion.

That level was reached in mid-May. So Treasury began to employ a host of "extraordinary measures" to buy Congress time and continue paying all the country's bills in full and on time. For instance, Treasury first temporarily stopped issuing special securities to state and local governments. It may also, for a time, stop reinvesting federal workers' retirement savings in short-term bonds.

If Congress doesn't raise the ceiling in coming months, the United States will be at risk of default. Without being able to borrow new money from the markets, Treasury won't have enough revenue coming in to pay all the country's obligations.

That's an untenable position. Treasury would be forced to make legally questionable decisions -- either picking who to pay and who to stiff until lawmakers approve a debt ceiling increase, or choosing to delay payments to everyone on any given day.

The expectation is lawmakers won't raise the debt ceiling until they absolutely have to. Many Republicans say they won't approve an increase unless their spending cut demands are met. Democrats, meanwhile, say they won't agree to the magnitude of cuts that Republicans want, especially on domestic programs.

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