US faces October deadline to raise debt limit or government 'will run out of money'

US Treasury Secretary warns in letter that administration is running out of accounting maneuovers to avoid hitting borrowing limit

US Treasury Secretary Jacob Lew has told Congress that the government will run out of money to pay its bills in mid-October unless lawmakers raise the country's borrowing limit, which is capped at $16.7 trillion.

Lew said in a letter to House of Representatives Speaker John Boehner released today that the government is running out of accounting maneuovers it has used to avoid hitting the borrowing limit. Lew pressed Congress to act so Treasury can keep paying the government's bills.

The government is spending more than it takes in, running up annual deficits in excess of $1 trillion in each of the past four budget years. It has been borrowing the difference to meet its obligations.

Lew said it's impossible for Treasury to predict exactly when borrowing limit will be reached. But he warns that if action isn't taken soon, the government could be left with $50 billion in cash by mid-October.

Lew told CNBC in a Tuesday interview that there cannot be any question that the United States is a country that pays its bills.

"It's not as if we get to go back and undo the commitments we made," he said.

Earlier this year, Congress temporarily suspended the borrowing limit so lawmakers could focus on other budget debates. Treasury has kept the government operating for several months through its bookkeeping maneuvers. A smaller deficit this year has helped.

Republicans want to reduce future deficits by cutting back sharply on spending. Democrats have proposed a mix of spending cuts and tax increases, which Republicans strongly oppose. The issue awaits resolution when lawmakers return from their August recess.

Congress last passed legislation to increase the borrowing limit in the summer of 2011 after a months-long negotiation between President Barack Obama and top lawmakers like Boehner. Republicans forced Obama to accept about $2 trillion in spending cuts over the coming decade in exchange for a like-sized increase in the borrowing limit.

Obama says he won't negotiate on the debt limit this time and says Congress should fund the spending it has previously approved.

Many Republicans want to use upcoming budget deadlines to mount an assault on Obama's signature health care law.

Lew told CNBC the administration would not accept a delay or defunding of parts of the law, which aims to help millions of uninsured people gain health insurance coverage.

AP

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