U.S. Treasury Secretary Jacob Lew said investor confidence that a deal can be struck to raise the debt limit is probably “greater than it should be.”
Lew, who spoke at the Bloomberg Markets 50 Summit in New York Tuesday, repeated that President Barack Obama won’t negotiate with congressional Republicans on increasing the $16.7 trillion ceiling on the nation’s borrowing authority.
“I think that if you look at the calm out there, which I think is a bit greater than it should be, there’s a sense that 2011 was a terrible experience, and nobody would do that again,” Lew said.
The U.S. was stripped of its AAA ranking by Standard & Poor’s in August 2011, a move that partly reflected an impasse in Congress over raising the debt ceiling as well as the government’s lack of a plan to rein in its debt load.
While the downgrade didn’t result in investors charging the U.S. more to borrow, as 10-year Treasury yields slipped to record lows in July 2012, the move contributed to a global stock-market rout that erased about $6 trillion in value from July 26 to Aug. 12, 2011.
Lew told Congress in an Aug. 26 letter that lawmakers need to raise the limit by the middle of October, when he expects that the Treasury Department will have about $50 billion left to fund the government. That figure is probably smaller now, he said Tuesday.
“People have to take seriously the fact that Congress has a lot of work to do in a short period of time,” the Treasury Secretary said.
Lew also said Tuesday that the U.S. sanctions against Iran are working.
“We now have to see if the government is going to change its policy,” Lew said. “We are going to stay on the sanctions and push as hard as we can.”
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