Jack Lew: I worry about 'terrible' debt limit accident

Treasury Secretary Jack Lew said Monday he worries that waiting until the last minute to raise the nation's borrowing authority could result in an accident "that would be terrible."

Last week, Lew said the U.S. debt ceiling will be exhausted Nov. 3, two days before previously estimated. In a letter to congressional leaders, he added that a remaining cash balance of less than $30 billion would swiftly deplete.

"Our best estimate is November 3rd is when we'll exhaust what we call extraordinary measures; those are things we can do to manage things. I will run out of things that I can manage on November 3rd," Lew told CNBC's "Squawk Box."

The federal government is scraping by just under its $18 trillion legal borrowing limit.

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Not increasing the debt limit would be "ridiculous," Lew said. He stressed that the risk of not acting is real. "There are people who think we have the ability to choose what day this is. We do our very best to count the numbers ... [and] give Congress the best information we have."

Disarray among Republicans over Rep. John Boehner's successor as House speaker is complicating negotiations. According to an aide, Boehner may try to pass a debt-limit increase before he retires from Congress, which had been scheduled for the end of the month.

Only Congress can raise the debt ceiling. Lew insisted that a hike is not a commitment to new spending but an ability to pay the bills on money already spent. Conservatives have in the past targeted the borrowing limit as leverage in budget negotiations.

Lew dismissed the idea that the government could prioritize what bills to pay. "Once you no longer consider all of your obligations rock solid, you're no longer the full faith and credit of the United States."

"It's also not possible to pick and choose. We have about 80 million transactions a month. Our system wasn't set up not to pay," he added.

A debt-ceiling fight in the summer of 2011 resulted in a credit-rating downgrade of the United States by Standard & Poor's. The Treasury also came close to missing payments in 2013.

Lew: China must let currency go up and down

As for China's currency, Lew told CNBC: "There's still room for the renminbi to appreciate. Right now, there's downward pressure on the renminbi. Some of it is as a result of the policies that they made and the way they announced them over the summer."

China's central bank has in recent months increased its sales of Treasury securities to raise cash to support its currency. In August, China unexpectedly and sharply devalued the renminbi, or the yuan as its also referred to, rattling markets around the globe.

"We have to make sure that China understands that it's very important that they need to keep their commitment to let the renminbi go up as well as down," Lew said.

On the issue of free trade, Lew said the recently struck Trans-Pacific Partnership (TPP) is a "very powerful set of tools," with tough provisions to get participating countries to "keep their word" on currency.

The free trade agreement has become a lightning rod on Capitol Hill and on the presidential campaign trail. Democrats are generally against it, in a break with President Barack Obama, who won fast track authority to negotiate it with the help of GOP lawmakers.

But now, even Republicans are starting to second-guess the agreement.

Lew: You don't want to get surprised by rates

Lew refused to comment on whether the Federal Reserve would or should increase interest rates. Central bankers meet next week, after deciding not to hike for the first time in nine years at their September gathering.

But Lew said he's been factoring in higher rates just in case. "Over the last few years we've predicted higher interest rates, not lower interest rates, because that's the conservative thing to do to make sure you don't get surprised by a higher debt service costs."

"We can manage wherever the Fed goes," he added.

Fed Chair Janet Yellen has said the Fed is likely to increase rates this year if the economy cooperates. But with concern about slowing growth in China spreading to America and stubbornly low U.S. inflation, the futures market sees early 2016 as more likely.

The health of the labor market could be a deciding factor about rates.

While he wouldn't comment on the job picture as it relates to the Fed, Lew did say say he's been encouraged by the improvement in job growth and the unemployment situation.

But he added, "We need to see wages go up a bit if we're going to see middle class incomes improving. There's room for some wage growth in our economy. I think it would be a good thing if we saw some wage growth."

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— Reuters and AP contributed to this report.