Steven Mnuchin urges Congress to raise debt limit before August recess

Treasury Secretary Steven Mnuchin told lawmakers Thursday he has "no intent" to prioritize certain government payments and delay others if Congress fails to raise the federal borrowing limit.

"I think that doesn't make sense," he told a House panel, when asked whether Treasury was considering prioritizing payments. "The government should honor all of its obligations and the debt limit should be raised."

Government debt hit the statutory limit in mid-March, and Treasury has been using extraordinary measures since then to raise enough cash to keep paying the government's bills. Mr. Mnuchin said he would be alerting Congress that his previous letter notifying them of such measures "will be extended through September."

Mr. Mnuchin reiterated Wednesday in a separate hearing on Capitol Hill that Treasury can keep paying the government's bills through September. The Congressional Budget Office has estimated Treasury could run out of room to keep making payments in full and on time in early or mid-March. After that, Congress would need to raise the limit or risk missing certain government payments.

Some Republicans, including White House budget director Mick Mulvaney when he was a member of Congress, have argued during previous debt limit showdowns that the government could keep making payments to bondholders and delay other payments, such as Social Security and veterans benefits, to avoid a technical default. Obama administration officials balked at such proposals at the time, arguing that markets would still view the strategy as a default.

Mr. Mnuchin also said Wednesday the uncertainty surrounding the debt limit increase is already imposing "significant" costs on taxpayers. He has urged Congress to raise the debt limit before they leave for a five-week August recess, but GOP leaders have announced no plans to deal with the issue before they return in September.

Write to Kate Davidson at kate.davidson@wsj.com

(END) Dow Jones Newswires

July 27, 2017 12:11 ET (16:11 GMT)