WASHINGTON — The United States is set to run out of borrowing authority in mid October, leaving the government at a high risk of not being able to pay for Social Security checks, military salaries and other operations, the Obama administration said Monday.
The announcement creates a new crisis point in the nation's protracted fight over the size and role of government.
Republicans are demanding significant new spending cuts in exchange for increasing the nation's $16.7 trillion debt limit, with some GOP lawmakers insisting on a delay or the scrapping of President Barack Obama's signature health care law. Obama says he will not negotiate on the debt limit, which is the government's legal cap on borrowing.
With the two sides far apart, there is no clear path to resolving the differences. Not raising the limit would ultimately lead to a default, undermining the nation's credit.
The Obama administration on Monday did not indicate the date that such a default might occur. Rather, it said that it expects to have only $50 billion in cash on hand in mid October, with no ability to borrow more.
That would not cover the nation's spending for long, Treasury Secretary Jack Lew said in a letter to congressional leaders.
He added that if the debt limit is not raised, investors who own trillions of dollars in U.S. government bonds could begin to refuse to lend money to the nation.
"Such a scenario could undermine financial markets and result in significant disruptions to our economy," Lew said.
Steve Bell, economic policy director at the Bipartisan Policy Center, said lawmakers should not take comfort in the $50 billion the Treasury will have once it runs out of borrowing authority. The amount of money coming in and out of federal coffers fluctuates wildly, he said, adding that the $50 billion might last only three or four days.
Separately, the White House and Congress face a deadline at the end of September to renew regular funding for government operations — or risk a shutdown.
In a shutdown, many agencies would close but "essential" functions, such as Social Security and Medicare payments, would go on.