Treasury Secretary Steven Mnuchin warned House Speaker Nancy Pelosi (D-CA) Friday that the federal government could run out of cash sooner than expected and urged Congress to raise the debt ceiling before leaving town for its August recess.
“Based on updated projections, there is a scenario in which we run out of cash in early September, before Congress reconvenes,” Mnuchin said in a brief letter to Pelosi. “As such, I request that Congress increase the debt ceiling before Congress leaves for summer recess.”
Pelosi said Thursday that she wants lawmakers to raise the debt ceiling before the House leaves town on July 26 for its six-week summer break. “I am personally convinced that we should act on the caps and the debt ceiling,” she said Thursday after speaking with the Treasury secretary. “Prior to recess.”
What’s the holdup? The debt ceiling is currently caught up in negotiations over next year’s spending levels. Lawmakers and the White House have been unable to agree on topline numbers and whether a deal would cover one year or two. And there is little support in Congress for passing a standalone bill focused solely on the debt ceiling.
Why is the debt situation deteriorating? Mnuchin’s letter echoes a report earlier this week from the Bipartisan Policy Center that said the “X Date” – the date when the government can no longer pay all of its bills – could arrive as soon as the first two weeks of September. The U.S. technically hit its debt limit in March and has been using “extraordinary measures” to meet its obligations since then. But weaker-than-expected federal revenues, driven in part by the Republican tax cuts, along with increased spending are driving up the deficit and increasing the likelihood that the Treasury runs out of money sooner.
What’s next? Mnuchin and Pelosi are expected to speak again Friday. If lawmakers are unable to reach an agreement and the U.S. runs out of cash before Congress comes back to town on September 9, the government would default on some payments, potentially damaging the economy.