Lew to Congress: Temporary funding measures started

The U.S. Treasury has temporarily stopped issuing state and local government bonds ahead of the looming breach of the debt limit, Treasury Secretary Jack Lew told Congress on Friday.

The step will be followed by other "extraordinary measures" the Treasury can take to fund the government temporarily once the U.S. reaches its statutory debt ceiling on Monday. It sets up a political chess match to raise the government's borrowing authority before it exhausts its cash and defaults on its obligations.

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"Because Congress has not yet acted to raise the debt limit, the Treasury Department will have to employ further extraordinary measures to continue to finance the government on a temporary basis," Lew wrote in a letter addressed to House Speaker John Boehner, R-Ohio.

Lew plans to declare a "debt issuance suspension period" in which the Treasury will temporarily stop investment in certain federal pension funds, among other measures.

Congress in February 2014 passed the Temporary Debt Limit Extension Act, which suspended the statutory debt limit through Sunday. The Congressional Budget Office said earlier this month that if Congress does not raise the federal debt limit, the Treasury Department will exhaust all of its borrowing capacity and run out of cash in October or November, slightly later than a previous forecast.

"I respectfully urge Congress to raise the debt limit as soon as possible," Lew wrote.

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The debt ceiling, which has been raised 74 times in the last five decades, is a perennial political football in Washington. Under President Barack Obama, the limit has been hiked five times, fewer than predecessors George W. Bush and Bill Clinton.

The most recent debt ceiling was $17.2 trillion and debt accumulated since last year's suspension brings the total to $18.1 trillion, the CBO said earlier this month.

— CNBC's Everett Rosenfeld contributed to this report.