WASHINGTON—Treasury Secretary Jacob Lew on Monday pressed Congress to deal soon with the debt ceiling, saying the Obama administration has much less flexibility to avoid a crisis than in previous standoffs because it is entering the height of tax-filing season.
Mr. Lew, speaking at the Bipartisan Policy Center, said “time is short” for a fix. In October, Congress agreed to suspend the debt ceiling until Feb. 7, but the government will be able to continue borrowing money to pay bills through sometime later in the month, Mr. Lew said. After that, it will be left to pay bills with only the remaining cash on hand, as well as incoming tax revenue.
“Notably, we expect our outlays over the coming weeks to exceed our net inflows—largely due to the payment of tax refunds—so we will draw down our cash balance faster than at other times of the year,” Mr. Lew said, according to prepared remarks. “Without borrowing authority, at some point very soon, it would not be possible to meet all of the obligations of the federal government.”
Mr. Lew said this would put at risk “the economic recovery, the financial markets” and “the dependability of Social Security and military salaries.”
He didn’t say whether interest payments to bondholders would be put at risk. The White House has historically shied away from declaring what payments it might make if the debt ceiling isn’t raised.
Republicans in the past have criticized the White House for the way it deals with the debt ceiling, saying the Obama administration tries to scare seniors and business leaders by warning of grave threats if the GOP doesn’t increase the government’s borrowing limit. But Republicans remain very divided over how to proceed.
Some want to demand major policy or budget concessions in exchange for any deal to raise the debt ceiling, while a number of others have said they would face political blowback during an election year if they risk another standoff, such as the one that led to the government shutdown in October. House Republicans gathered at a retreat last week and debated how to proceed, but they didn’t not come up with a firm plan.
The government must repeatedly deal with the debt ceiling in large part because the government spends more money than it brings in through revenue, running a deficit. The government borrows money to cover the budget deficit by issuing new debt. The deficit has come down sharply in the past few years, but law dictates that the Treasury Department can only issue debt up to a certain level set by Congress. With the debt continuing to rise—it now exceeds $17 trillion—the White House has had to return to Congress multiple times to ask for the debt ceiling to be addressed.
In 2011, the White House agreed to a large deficit-reduction deal in exchange for raising the debt ceiling, but it has since refused to engage in similar talks, saying it risks damage to the economy.
Mr. Lew said Monday that budget debates should be held during budget talks, not during discussions over how to deal with the debt ceiling. Twice in the last 13 months, House Republicans have agreed to suspend the debt ceiling in exchange for little to no policy changes. Republicans have suggested they could pursue a number of different strategies this time, including pushing for changes in the health care law to demanding approval of an oil pipeline. But so far they haven’t coalesced around one specific strategy.
Mr. Lew, meanwhile, said the economy is gathering strength, and called on Congress not to do anything that could stall growth.
“The table is now set for us to build on the economic progress that we have made over the last five years—and it is incumbent on Washington to be part of the solution, and to avoid the brinkmanship of recent years that has done so much to diminish economic momentum.”
Write to Damian Paletta at damian.paletta@wsj.com
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