Treasury chief begins ‘extraordinary measures’ to avoid debt default

Treasury Secretary Jack Lew is preparing to deploy “extraordinary measures” to avoid default as the nation’s debt limit again takes effect.

In a letter to Speaker John Boehner (R-Ohio) sent Friday, Lew called on Congress to quickly raise the borrowing cap for the nation’s $18 trillion debt “without controversy and brinkmanship.”

“Increasing the debt limit does not authorize new spending commitments. It simply allows the government to pay for expenditures Congress has already approved, thereby protecting the full faith and credit of the United States,” he wrote.

Boehner’s office responded to Lew’s letter with a rebuke of President Obama’s fiscal policies.

“This is a sad reminder that President Obama’s proposed budget will never, ever balance,” said Boehner spokesman Michael Steel. “House Republicans believe there is a better choice than endless taxing, borrowing, deficits and debt.”

{mosads}The nation’s borrowing cap was suspended over a year ago, and under that law, it will again take effect on March 16. The limit will then be automatically hiked to cover all government borrowing that occurred over the suspension period.

But that also means that, as soon as the debt limit returns, the government will immediately be at that ceiling. As such, the Treasury Department will yet again need to deploy its set of extraordinary measures to free up space under that cap to continue making payments.

On March 16, Lew said the Treasury will stop issuing a special type of security meant to help state and local governments comply with tax rules. Halting those securities is typically the first in a series of steps the department takes to ensure it can continue to pay bills without extra borrowing room.

On Tuesday, the Congressional Budget Office (CBO) estimated that the Treasury Department’s tools will be able to stave off a missed payment until sometime in the fall, likely October or November. However, the CBO emphasized that this initial estimate could change in the coming months, as the government receives and sends out huge amounts of payments.

President Obama has typically demanded Congress raise the borrowing cap without any additional policy provisions, calling the matter too critical to be used for leverage. But the upcoming debt-limit debate will mark his first with an all-Republican Congress, and at least some GOP lawmakers will be looking to extract concessions from the president in exchange for a borrowing boost.

House Democratic Leader Nancy Pelosi (D-Calif.) called on Congress to hike the borrowing cap “immediately,” and placed blame for any drama squarely at the feet of Republicans.

“Republicans are only stoking the fires of uncertainty,” she said in a statement. “House Republicans need to stop creating crises and work with House Democrats to advance the needs of America’s families.”

— Updated at 11:20 a.m.