WASHINGTON — The United States could hit its borrowing limit by August if Congress fails to raise or suspend the current debt ceiling, the Treasury Department warned in a letter on Friday.
Treasury Secretary Scott Bessent urged congressional leaders to pass some sort of deal to raise the debt ceiling before lawmakers leave for a five-week recess on July 24. Although there is not a specific date on which the country is expected to reach the limit, Bessent warned it would likely occur in August — giving Congress just three months to act.
“Prior episodes have shown that waiting until the last minute to suspend or increase the debt limit can have serious adverse consequences for financial markets, businesses, and the federal government, harm businesses and consumer confidence, and raise short-term borrowing costs for taxpayers,” Bessent wrote in a letter to congressional leaders. “A failure to suspend or increase the debt limit would wreak havoc on our financial system and diminish America’s security and global leadership position.”
House Republicans have plowed ahead with plans to raise the debt limit by $5 trillion as part of their massive reconciliation package, which will rely on just GOP votes to pass the House and Senate.
Republicans included a provision to raise the debt ceiling budget resolution as a way to strip Democrats of the chance to use the impending deadline as leverage to attach some of their own policies.
GOP leaders hope to get the entire package finalized and passed through both chambers of Congress by July 4 at the latest, which would put them on track with Bessent’s deadline.
However, that could be easier said than done. Republicans have run into roadblocks advancing portions of the package due to internal disagreements over certain policy proposals.
It’s not clear if Democratic leaders will work with Republicans on a backup plan to raise the debt limit if the GOP’s reconciliation package hits a wall. It’s also unclear if Democrats would want to help the Trump administration avoid a default as they accuse the president of driving up the debt.
The debt limit is the total amount of money the federal government is authorized to borrow in order to pay off existing obligations, tax refunds, interest on the national debt, and other payments, according to the Treasury Department.
When the Treasury reaches the debt ceiling, lawmakers must pass legislation to raise or suspend the limit to avoid a default. If the country defaulted — in other words, failed to make those minimum payments — it could cause severe consequences for the national and global economies.
Once the debt limit is reached, the Treasury secretary can implement “extraordinary measures” as a safety cushion to allow for normal operations without risking default. How long those temporary measures will last depends on the current rate of revenue and spending, making it hard to predict an exact date for when money will run out, which is why it’s referred to as the X-date.
Congress most recently suspended the debt ceiling in the summer of 2023 when lawmakers passed the Fiscal Responsibility Act, punting the deadline until Jan. 1, 2025. The Treasury Department later announced on Jan. 21 it would begin utilizing extraordinary measures to avoid default until the ceiling could be raised.
Congress has consistently acted on raising the debt limit ahead of projected defaults. Since 1960, lawmakers have passed 78 pieces of legislation to “permanently raise, temporarily extend, or revise the definition of the debt limit,” according to the House Budget Committee.
Forty-nine of those instances occurred under a Republican president and 29 under a Democratic president.