Treasury Secretary Jack Lew has warned that he US will hit its debt ceiling by October 17, leaving the government with half the money needed to pay its bills.
Jack Lew said that unless the US is allowed to extend its borrowing limit, the country will be left with about $30 billion to meet its commitments.
“Net expenditures on certain days can be as high as $60 billion,” he said.
The US government and Republicans are at stalemate over extending the credit limit needed to avoid default.
President Barack Obama and the Democrats have said they will not negotiate with Republicans over their demand that the government agrees budget cuts in return for backing a rise in the borrowing limit.
Jack Lew’s comments underline how close Washington is to running out of money. Failure to reach a deal would be “catastrophic” for the US economy, he said in a letter to House Speaker John Boehner.
“Treasury now estimates that extraordinary measures will be exhausted no later than October 17. We estimate that, at that point, Treasury would have only approximately $30 billion to meet our country’s commitments.
Jack Lew said that unless the US is allowed to extend its borrowing limit, the country will be left with about $30 billion to meet its commitments
“If we have insufficient cash on hand, it would be impossible for the United States of America to meet all of its obligations for the first time in our history,” Jack Lew said.
Jack Lew urged Congress to “act immediately” and increase the borrowing ceiling, which has been limited at $16.7 trillion since May.
In return for supporting a rise in the ceiling, Republicans are pushing for a series of measures, including a delay by a year in the introduction of the Affordable Care Act, which would increase benefits under Barack Obama’s Medicare health programme.
A spokesman for John Boehner said Jack Lew’s letter was a reminder of the need for an agreement to raise the ceiling while at the same time cutting US debt.
But he added: “And it should remind President Obama that refusing to negotiate with Congress on solutions just isn’t an option.”
Washington faced a similar impasse over its debt ceiling in 2011. Republicans and the Democrats only reached a compromise on the day the government’s ability to borrow money were due to run out.
In his letter, Jack Lew reminded Congress that the 2011 battle “caused significant harm to the economy”.
That fight was resolved just hours before the country could have defaulted on its debt, but nevertheless led to ratings agency Standard & Poor’s downgrading the US for the first time ever.
The 2011 compromise included a series of automatic budget cuts known as the “sequester” which came into affect earlier this year.
US Treasury Secretary Jack Lew has warned that the government will reach its debt limit by mid-October unless Congress acts quickly.
The debt ceiling was last raised in January. The government can no longer borrow if it is reached.
Jack Lew said that in such a case it will be unable to meet obligations such as pensions, military salaries and Medicare payments.
The country’s borrowing limit is currently capped at $16.7 trillion.
“Extraordinary measures are projected to be exhausted in the middle of October,” Jack Lew said in a letter to House Speaker John Boehner and other lawmakers.
“At that point, the US will have reached the limit of its borrowing authority, and Treasury would be left to fund the government with only the cash we have on hand on any given day,” he said.
The cash balance at that time is forecast to be about $50 billion, which Jack Lew said, would be “insufficient to cover net expenditures for an extended period”.
The US government will reach its debt limit by mid-October unless Congress acts quickly
He said: “Operating the government with no borrowing authority, and with only the cash on had on a given day, would place the United States in an unacceptable position.”
There have been tense debates between the White House and congressional Republicans over the government’s debt ceiling, spending cuts, and other fiscal matters.
In August 2011, the Republicans and the Democrats took a hard line while debating raising the borrowing limits.
They only reached a compromise on the day the government’s ability to borrow money was due to run out.
The delay in reaching a deal at that time led ratings agency Standard & Poor’s to downgrade the US for the first time ever, which sparked volatility in the financial markets.
The compromise also included a series of automatic budget cuts known as the “sequester” which came into affect earlier this year.
However, in his letter Jack Lew argued that raising the debt limit does not increase government but “simply allows Treasury to pay for expenditures [the] Congress has previously approved”.
He warned that a delay in raising the limit “would cause irreparable harm to the American economy”.
Jack Lew explained that if investors become unwilling to loan to the US, the country could face an immediate cash shortfall.
”Such a scenario could undermine financial markets and result in significant disruptions to the economy,” he said.
Acting head of the US Internal Revenue Service (IRS) Steven T. Miller has quit after it emerged his staff singled out conservative groups for extra scrutiny, President Barack Obama has announced.
Treasury Secretary Jack Lew had asked for and accepted the resignation of IRS Acting Commissioner Steven Miller, he said.
“I will do everything in my power to make sure nothing like this happens again,” Barack Obama told a news conference.
The scandal has been one of several to rattle the White House in recent days.
Earlier on Wednesday, Attorney General Eric Holder faced four hours of questioning at a Congressional hearing on the IRS, the secret seizure of phone records from the Associated Press news agency, and the attack on the US consulate in the Libyan city of Benghazi.
Eric Holder told the House judiciary committee that it would take time for the FBI to determine if any laws had been broken by IRS personnel.
In a short statement to reporters at the White House, President Barack Obama said he had reviewed the Treasury Inspector General for Tax Administration (TIGTA) report on the IRS’s targeting of conservative groups and found the “misconduct” uncovered was “inexcusable”.
“Americans are right to be angry about it, and I am angry about it,” the president said.
“I will not tolerate this kind of behavior in any agency, but especially in the IRS, given the power that it has and the reach that it has into all of our lives.”
“The IRS has to operate with absolute integrity.”
Steven T. Miller has quit as IRS head after it emerged his staff singled out conservative groups for extra scrutiny
To that end, Barack Obama revealed that the treasury secretary had requested and accepted the resignation of acting commissioner of the IRS.
“It’s important to institute new leadership that can help restore confidence going forward.”
Barack Obama said the treasury department would also put in place new safeguards to “make sure this kind of behavior cannot happen again” and that the IRS would begin implementing the TIGTA’s recommendations immediately.
In a letter to colleagues, Steven Miller said he would leave his role in June.
“There is a strong and immediate need to restore public trust in the nation’s tax agency,” he added.
Steven T. Miller took over leadership of the agency in November, when the five-year term of Commissioner Douglas Shulman ended.
At the time when conservative groups were targeted, Steve Miller was a deputy commissioner who oversaw the division responsible.
On Tuesday, the Treasury Inspector General for Tax Administration’s report on the scandal placed the blame on “ineffective management”.
It found IRS managers had allowed “inappropriate criteria” to be developed and stay in place for more than 18 months, resulting in “substantial delays” in processing applications for tax-exempt status, and requests for “unnecessary information”, such as lists of donors.
Among the criteria used by the IRS Determinations Unit to flag groups for review, the TIGTA said, were having words like “Tea Party”, “Patriots” and “9/12” in their names; or manifestos that focused on the government’s fiscal policy and educating the public to “make America a better place to live”, or criticized how the country was being run.
Senior IRS officials told the watchdog that the decision to focus on conservative groups had not been influenced by any individual or organization outside the agency.
Some Republicans, including two high-profile governors, have called for a special prosecutor to investigate.
House Speaker John Boehner told reporters earlier on Wednesday: “My question is, who’s going to jail over this scandal?”
At least three Congressional panels are planning hearings, and House judiciary committee member Representative Darrell Issa said he had asked five mid-level IRS employees be made available for questioning.