U.S. Treasury Secretary Jack Lew says it would be "a grave mistake" for the United States to fail to increase its borrowing limit in the next week so it does not default on a wide range of financial obligations.
Lew told a Senate panel Thursday the U.S. will run out of borrowing authority in a week as its reaches its current $16.7 trillion debt ceiling. At that point, he said the Treasury would only have about $30 billion on hand and some incoming revenue, but not enough to pay all its bills.
He said the government should not have to make "perilous choices" whether it uses its available cash to pay government bond holders, pension and health benefits owed to older Americans, aid to military veterans or businesses that provide services to the government.
"The United States should not be put in a position of making such perilous choices for our economy and our citizens," he said. "There is no way of knowing the irrevocable damage such an approach would have on our economy and financial markets."
But Lew declined to say how much of an increase U.S. President Barack Obama wants in the debt ceiling, other than to say it should cover borrowing needs for a longer, rather than shorter period of time.
The debate over increasing the U.S. debt limit comes in the midst of a 10-day partial government shutdown because of a stalemate between Obama, a Democrat, and his Republican opponents in Congress over government spending priorities and the implementation of widespread health care reforms that are his signature legislative achievement.
Senator Max Baucus, the Democratic chairman of the Senate Finance Committee, said that while the government shutdown "has been disruptive, a default would be a financial heart attack."
Republican Orrin Hatch criticized Obama for not negotiating over government spending issues while asking for an increase in the country's debt limit without conditions.
Hatch noted that in 2006, then-Senator Obama called a proposed increase in the debt ceiling at the time a "failure of leadership," when Republican President George W. Bush was in office. Hatch said the borrowing limit has since been increased seven times during Obama's term in the White House, from $11.3 trillion to the current $16.7 trillion.
U.S. news outlets say congressional Republicans are considering a proposal to temporarily extend the government's borrowing authority - possibly for four to six weeks - in order to end the debt ceiling stalemate with the president to avoid a potential default.
House Republicans are scheduled to discuss the issue early Thursday, hours before a small group will hold talks with Obama at the White House. The president invited all 232 House Republicans, but Speaker John Boehner is sending just 18 of his members, and only those with leadership posts.
The standoff over the government shutdown between Republicans and Obama is chiefly over the president's health care law that by January will require most Americans to buy health insurance or pay a fine.
Republicans had originally sought to either end spending for the law or delay it in exchange for halting the shutdown and raising the debt ceiling, and Boehner has called on Obama to hold negotiations before letting the House vote.
But the president says he will not negotiate until Congress approves the issues without any conditions. The partial shutdown has halted numerous government services, including death benefits to the families of U.S. service members killed in combat. The public backlash prompted the House to vote unanimously Wednesday to restore the benefits. The measure now goes to the Senate.
The Pentagon has reached an agreement with a private charity to pay the benefits until funding is restored.