Congress 'playing with fire' on debt limit, warns Treasury Secretary Jack Lew

Making the rounds of TV news shows Sunday, Treasury Secretary Jack Lew said failure to raise the US debt limit means 'credit markets could freeze, the value of the dollar could plummet, US interest rates could skyrocket.'

Jonathan Ernst/Reuters
Treasury Secretary Jack Lew addresses the Economic Club of Washington Sept. 17. Mr. Lew warns Congress that waiting until the last minute to raise the nation's limit on borrowing could lead to irrevocable damage to the economy.

Treasury Secretary Jack Lew assumed his Mr. Sobersides role Sunday, warning the nation and the world that a failure by Congress to raise the US debt limit next week amounts to “playing with fire.” He didn’t use the fiddles and Rome analogy, but he might as well have.

It’s a message Mr. Lew has been making for at least a week now, the main difference being the inexorable march toward Oct. 17, when the United States reaches its $16.7 trillion federal debt limit and the government plunges into financial and economic territory it’s never seen in its history. Eleven days and counting.

“Credit markets could freeze, the value of the dollar could plummet, US interest rates could skyrocket,” the Treasury Department said in a report Oct. 3. “The negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse.”

Speaking on four TV news shows Sunday morning, Lew continued the drumbeat of admonition.

“Congress is playing with fire,” he said on CNN’s “State of the Union.” “If the United States government, for the first time in its history, chooses not to pay its bills on time, we will be in default, there is no option that prevents us from being in default if we don’t have enough cash to pay our bills.”

Some have suggested that President Obama could use the 14th Amendment to the US Constitution to unilaterally raise the debt limit, but the administration says that's not so.

"The White House has spoken quite clearly to this," Lew said. "The president does not have the authority to take action in that kind of a way. The president consulted with his lawyers, and that's the conclusion that he's reached."

"You know, there is a desire here for there to be some kind of a magic solution," he continued, addressing the current government budget shutdown as well as the debt-limit crisis. "There is an easy solution ... A majority in Congress would do the right thing if given a chance to vote to open the government. A majority in Congress would do the right thing if given a chance to let us pay our bills. Congress needs to work, they need to do their job, but the majority needs to be given a chance."

“The majority” in this case would be all the Democrats and a couple dozen Republicans – those willing to vote for a “clean” continuing budget resolution unencumbered by any attempt to stymie the new health-care insurance law dubbed “Obamacare” – in a House of Representatives controlled by the GOP and its embattled speaker, John Boehner.

As most political analysts describe it, Mr. Boehner finds himself boxed in by 40 or so recently elected tea party upstarts in his caucus, who have been whipped into a kind of intraparty independence if not rebellion by freshman Sen. Ted Cruz (R) of Texas – himself the target of sometimes open scorn by some more-veteran Republican lawmakers.

There seemed to be hints this past week that Boehner would allow a “clean” House vote to raise the debt ceiling. But he backed away from that notion Sunday.

"I told the president, there's no way we're going to pass one,” he said on ABC’s “This Week.” “The votes are not in the House to pass a clean debt limit. And the president is risking default by not having a conversation with us."

In this case, Boehner implied, such a conversation would focus on government spending, not necessarily on Obamacare.

“I'm not going to raise the debt limit without a serious conversation about dealing with problems that are driving the debt up,” he said, pointing out that past presidents – including Obama himself in 2011 – negotiated the debt limit with Congress. “It would be irresponsible of me to do this."

“The nation's credit is at risk because of the administration's refusal to sit down and have a conversation," Boehner said.

Senator Cruz, appearing on CNN after the Treasury secretary, denied the likelihood of disaster if the Oct. 17 debt-ceiling deadline passes without congressional action, which he still wants to tie to Obamacare as well as to spending cuts.

Lew, of course, disagrees: "Anyone who thinks that the United States government not paying its bills is anything less than default hasn't thought about it very clearly.”

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