UPDATE 1-Treasury's Lew: U.S. will exhaust borrowing capacity in mid-October
WASHINGTON, Aug 26 (Reuters) - U.S. Treasury Secretary Jack Lew pressed Congress on Monday to act quickly to allow the federal government to borrow more money, warning that the United States risks defaulting on its obligations if lawmakers do not act by mid-October.
"Congress should act as soon as possible to protect America's good credit by extending normal borrowing authority well before any risk of default becomes imminent," Lew said in a letter to congressional leaders.
The U.S. Congress authorizes government borrowing in a two-step process. First, lawmakers order the government to spend more than it takes in. Then, every few years, Congress raises a formal limit on borrowing so the government can pay its bills.
The government has been scraping up against the debt limit since May.
Lew said the government will exhaust its borrowing capacity in the middle of October and be left with about $50 billion in cash on hand, something that he said would make default imminent and could shake investors' confidence in the United States.
"Such a scenario could undermine financial markets and result in significant disruptions to our economy," he said in the letter.
Federal debt currently totals $16.7 trillion.
Republicans are considering using the imminent deadline for the debt ceiling as leverage for their agenda in Congress. The party is trying to weaken President Barack Obama's signature healthcare overhaul. Conservatives also want to reform tax laws and get Obama to approve a proposed oil pipeline.