The US will reach its spending limit in less than a month if leaders are unable to come to agreement on a new debt ceiling, according to Treasury Secretary Jack Lew.
In a letter sent to Congressional leaders, Mr Lew estimated the Treasury would exhaust all of its funding abilities no later than October 17, and called the potential impact “catastrophic”.
The White House is determined not to compromise when negotiating a rise to the $16.7tn limit, which it had in 2011 to avert a shutdown.
If an agreement is not reached before October 17, Mr Lew estimates the Treasury will have less than $30bn to use to cover expenses, below the $60bn in outlays it pays on same days, potentially leading to the first default by the US on its debt obligations.
From his letter:
The debt limit impasse that took place in 2011 caused significant harm to the economy and a downgrade to the credit rating of the United States. The drawn-out dispute caused business uncertainty to increase, consumer confidence to drop, and financial markets to fall. If Congress were to repeat that brinksmanship in 2013, it could inflict even greater harm on the economy. And if the government should ultimately become unable to pay all of its bills, the results could be catastrophic.