Lew warns Congress of February debt ceiling deadline

Lew sends letter to Congress warning of debt limit

The Obama administration warned Congress on Thursday the government could run out of borrowing room to help pay its bills as soon as February if lawmakers do not move swiftly to raise the nation's debt ceiling.

"I respectfully urge Congress to take action to raise the debt limit at the earliest possible moment," Treasury Secretary Jack Lew said in a letter to congressional leaders.

Congress passed a two-year budget deal on Wednesday to trim some spending cuts planned for next year, and the pact reduces the risk of a government shutdown early next year.

(Read more: Budget crisis)

But the legislation does nothing to directly address the potential financial crisis that looms if Washington does not raise the debt ceiling soon.

In October, Congress and the administration suspended a $16.7 trillion cap on borrowing until Feb. 7. A new, higher limit will then be set, incorporating borrowing done through that date.

If lawmakers do not raise the limit further, Treasury will be able to juggle money between government accounts to keep just under the new limit for a few weeks.

(Read more: CNBC explains the debt ceiling)

But Lew said the Treasury would exhaust these so-called extraordinary measures sometime between late February and early March. After then, it would no longer be able to borrow more to cover its expenses.

"While this forecast is subject to inherent variability, we do not foresee any reasonable scenario in which the extraordinary measures would last for an extended period of time," Lew said.

Once the money runs out, the government could start missing payments on its debt and other obligations, such as Social Security pensions. Many economists think a U.S. default could trigger a financial panic and perhaps even an economic depression.