The Treasury Department warned this week that the U.S. could run out of cash to pay its bills as soon as June 1, unless Congress manages to raise the debt limit before then.
The debt limit is the amount of money that the federal government is authorized to borrow to meet its existing legal obligations, including tax refunds, military salaries and Social Security and Medicare benefits.
Failing to increase it could have disastrous consequences for the domestic economy, and for global financial markets. Yet progress toward a resolution has been slow.
House Republicans want to tie a debt ceiling increase to cuts in federal spending and other policy changes, and narrowly passed a bill last week that would do just that. Meanwhile, Democrats — led by President Biden — insist that those conversations happen separately and are refusing to accept anything other than a "clean" debt ceiling bill.
President Biden is scheduled to meet with House Speaker Kevin McCarthy and other congressional leaders on May 9 to stress that point and discuss how to have separate negotiations about spending overall.
Jack Lew is familiar with this tightrope walk. As chief of staff and then treasury secretary under former President Barack Obama, Lew saw similar standoffs play out — and reach a resolution — in 2011 and 2013.
"[Biden is] in a position where he faces a Congress that is divided, a House that has made extreme demands really just to pay the bills for spending that's already been committed, and a history of being at the edge of the cliff not knowing how to resolve it," Lew tells Morning Edition's A Martínez.
One chapter in that high-stakes history book occurred in 2011, when the U.S. came within 72 hours of defaulting on its debt.
After weeks of negotiations failed, lawmakers managed to pass a plan (the "Budget Control Act") at the last minute — though neither party was entirely pleased with it, and the close call rattled the stock market and hiked up borrowing costs.
"The fact that we almost didn't make it was terrifying," Lew remembers. "And coming out of that was the Budget Control Act, which is not good policy, but also the conviction that you couldn't get that close to the edge of the cliff ever again."
He offered some advice to the current administration.
This interview has been edited and condensed for clarity.
Interview highlights
On how Biden should approach potential negotiations
I think ... it's the right thing to say you can't negotiate with a gun to your head, you can't negotiate over default, Congress has to raise the debt limit. But at the same time there's going to be a need to negotiate over fiscal policy, the spending bills for this year, and they should immediately shift the negotiation to the thing that they have to do without the consequences of default on the other side.
The history of these negotiations has gotten more and more polarized over the years. With one side willing to go right to the edge, you just can't take that risk.
On the short-term extension some Republicans have proposed
The fact that the spending year begins on Oct. 1 and the debt limit deadline appears to be as early as June 1 ... does create the problem that the most catastrophic fiscal consequence default comes before the funding of the government. And the thing that will have to be negotiated is the funding of the government. So there is an argument that to fund the government, figure out what you're able to do and then do the debt limit means you split the negotiations.
What we don't know is if after funding the government, the House has the ability and willingness to vote on the debt limit ... The question is, will the speaker of the House put on the floor a debt limit extension that can pass? And if there's a willingness to do that, the sequence would be better if the vote on spending bills came first.
On his 2011 experience with the debt limit
If you go back to 2011, when we really were as close to going over the cliff as we've ever been, it was a long process which began, if you remember, with President Obama and [House Speaker John] Boehner engaging in good-faith negotiations for what was called the "grand bargain." When that effort failed — and it failed because there just wasn't the ability for the two sides to agree on substance — the debate shifted into, '"Well, what do you do about the debt limit?"
That was a really hard negotiation. The demands were very big, it was a lot of spending cuts that were being demanded, and you just couldn't get there with policy that the two sides could agree to. There was a moment when we were worried that we were days away from a default when those of us in the room said: 'There's not a substantive agreement here, there's going to need to be a process.'
