Treasury Secretary Scott Bessent said Friday that the debt limit may prevent the federal government from meeting all its obligations starting at some point in August.
The current debt limit is $36.1 trillion, which the Treasury bumped up against in January. Officials have deployed extraordinary measures, including the suspension of some regularly scheduled federal pension investments, to maintain cash flow while meeting all fiscal obligations. But those extraordinary measures will eventually reach their limit, creating a deadline for default referred to as the X-date.
In a letter to House Speaker Mike Johnson, Bessent said a review of the April tax receipts indicates that there is a “reasonable probability” that the government’s cash reserves and extraordinary measures could be exhausted starting in August, during the congressional summer recess.
“Therefore, I respectfully urge Congress to increase or suspend the debt by mid-July, before its scheduled break,” Bessent said.
The Treasury secretary added that history has shown that waiting until the last possible moment to address the debt limit can damage financial markets, the government, private business and taxpayers. Bessent warned that “failure to suspend or increase the debt limit would wreak havoc on our financial system and diminish America’s security and global leadership position.”
One potential hurdle for raising the debt limit is that Republicans plan to address the issue in their “one big, beautiful bill” that extends the 2017 tax cuts and provides more defense and border funding. That bill is still very much up in the air at the moment, however, raising the odds that Congress may have to scramble to head off the threat of a debt default this summer.