TRG Treasury Fpo

WASHINGTON—Failure to reach agreement on a range of fiscal deadlines risked jeopardizing the U.S. economy's recent gains, Treasury Secretary Jacob Lew said Friday.

Mr. Lew addressed a meeting of financial industry executives one day after he notified Congress that the Treasury would be unable to rely on extraordinary measures to pay the country's bills on or around Nov. 5 unless Congress raises the federal borrowing limit. It has been employing those measures since mid-March, when a prior suspension of the debt limit expired.

"We've seen over the last year and a half that since Congress reached an agreement not to have fights every six months over either the budget or the debt limit, it's led to greater confidence," Mr. Lew said on Friday. "It's actually helped to stimulate stronger growth in the U.S. economy."

Financial markets have in previous debt-limit standoffs taken elaborate steps to prepare for a potential disruption in Treasury markets if the government is forced to suspend certain payments.

He said Congress should increase the federal borrowing limit, currently at $18.1 trillion, as soon as possible. "They just have to do it," he said. "We've been through this several times. … There are no good alternatives."

Tim Pawlenty, the former Minnesota governor who now heads the Financial Services Roundtable, a trade group, encouraged bank executives visiting Washington on Friday to press lawmakers for a debt-limit fix at meetings later in the day.

"It's like 'dining and dashing' where you eat the meat and then run out without paying," said Mr. Pawlenty, who moderated a discussion with Mr. Lew. "So we want to remind them if you've already spent the money, you have to be able to have the authorization to pay the bills."

Two other debt-limit estimates released Friday broadly confirmed the Treasury's latest analysis of when it would be unable to use extraordinary measures.

The Bipartisan Policy Center, a Washington think-tank that has maintained reliable estimates in the past, said the Treasury could run out of cash in mid-to-late November. The date is later than the one provided by Mr. Lew because Treasury's estimate looks at when the government will fund payments solely using daily cash flow, a step that would be "unprecedented," said Shai Akabas, an analyst at the BPC. The BPC estimate aims to pinpoint when the Treasury would then be unable to pay bills.

Meanwhile, Republican staff on the Senate Budget Committee estimated Friday that the Treasury would be unable to use extraordinary measures, where it suspends certain investments to free up cash to remain under the debt limit, between the end of October and the middle of November.

The report pointed to the potential for government funding costs to rise as the expiration of extraordinary measures nears. Demand for Treasury assets that mature around when the government might run out of cash to pay its bills has fallen during past standoffs, raising yields on those assets. "This dynamic increases the costs to the Treasury, thus aggravating the nation's fiscal condition," wrote William Beach, chief economist to the Senate Budget Committee's Republican majority.

Mr. Lew said he was optimistic that Republicans and Democrats would be able to work out any differences on spending and the debt limit, but his remarks hinted at the possible limits of bipartisan cooperation, particularly around his long-running effort to overhaul taxes on U.S. multinationals' foreign earnings to pay for a multiyear highway-funding extension.

"Obviously time is not our friend—there is not a lot of time left in this Congress—and there are still differences," he said. Senate Majority Leader Mitch McConnell (R., Ky.) has proposed a different approach to replenish the highway trust fund that doesn't rely on savings from a tax-code revamp.

While Mr. Lew didn't rule out a breakthrough, he offered a sober assessment of the political prospects for a deal. "Frankly, it's one that if we were in a different political climate, I would have higher confidence," he said.

Mr. Lew said any deal to revamp corporate-tax rates couldn't raise costs for the government, which has been a sticking point in discussions with Republicans. "It's going to have to be self-financed," he said.

Write to Nick Timiraos at nick.timiraos@wsj.com

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(END) Dow Jones Newswires

October 02, 2015 13:05 ET (17:05 GMT)

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