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US may soon be cash-strapped if debt limit remains the same: Lew

world Updated: Oct 16, 2015 13:21 IST
Us Treasury deficit

US Treasury Secretary Jacob Lew speaking in Washington. The Treasury Department on Thursday told Congress that it needs to act by November 3rd or the government will be dangerously close to being unable to pay all its bills. (AP Photo)

The US will exhaust its emergency cash-management measures by November 3 and risks running out of cash shortly thereafter if the debt limit is not increased by the Congress, Treasury secretary Jacob Lew has warned American lawmakers.

As of now, the federal debt limit is set at USD 18.1 trillion and the Obama Administration wants the Republican-controlled Congress to increase the debt limit thus allowing it to borrow more money to run day-to-day operation of the federal government.

In a letter to the Congress, Lew said that the Treasury would operate on a cash balance of less than USD 30 billion post-November 3rd, which would be depleted quickly.

“In fact, we do not foresee any reasonable scenario in which it would last for an extended period of time,” he said.

Lew also said the US government would not be able to meet most of its obligations without a higher debt ceiling and thus urged Congress to raise it.

“The government makes approximately 80 million payments a month, including Social Security and veteran benefits, military salaries, Medicare reimbursements, and many others,” Lew said.

“In the absence of congressional action, Treasury would be unable to satisfy all of these obligations for the first time in the history of the United States.

“The creditworthiness of the United States is an essential component of our strength as a nation. Protecting that strength is the sole responsibility of Congress, because only Congress can extend the nation’s borrowing authority,” he added.

Democratic Leader Nancy Pelosi urged the Republican leadership in the Congress to act fast.

“Failure to protect the full faith and credit of the United States would have a devastating impact on hard-working families across the country – including tumbling retirement savings and soaring interest rates for student loans, mortgages, credit cards, and car payments,” she said.

Meanwhile, latest figures showed that the deficit in 2015 has fallen to USD 439 billion, which is USD 44 billion less than the Financial Year 2014 deficit and USD 144 billion less than forecast in President Obama’s budget for Financial Year 2016.

As a percentage of Gross Domestic Product (GDP), the deficit fell to 2.5%, the lowest since 2007 and less than the average of the last 40 years.

“President Obama’s agenda continues to put Federal finances on a sustainable footing while laying the foundation for durable economic growth and broadly shared prosperity,” Lew said.