Treasury Department Urges Congress to Increase Debt Ceiling Before August to Prevent Default

Treasury Secretary Scott Bessent informed congressional leaders on Friday that the United States could exhaust its borrowing authority by August. In a letter dated May 9, he called on Congress to raise the debt ceiling by July, before they take their annual recess, to prevent significant economic turmoil. While acknowledging “significant uncertainty” regarding the exact timeline, Bessent pointed out that recent tax season receipts suggest a probable depletion of the federal government’s cash and extraordinary measures by August, coinciding with Congress’s recess.

Bessent expressed his concerns in the letter, stating that it is crucial for Congress to increase or suspend the debt limit by mid-July to safeguard the fiscal integrity of the country. He emphasized the importance of maintaining the full faith and credit of the United States. On the other hand, Republican leaders, who hold control in both the House and Senate, are aiming to propose a substantial increase in the debt ceiling, ranging from $4 trillion to $5 trillion, as part of a broader legislative effort to advance President Donald Trump’s agenda.

However, this goal appears challenging given the party’s difficulty in reaching consensus on various aspects of the proposed bill while managing narrow majorities. Consequently, it remains uncertain whether they will successfully push through the debt ceiling increase before the August deadline. Should they fall short in this endeavor, Republicans might need to address the debt limit issue independently and seek Democratic assistance to avert an economic crisis that could ensue from a potential default on U.S. debt.

Bessent cautioned that failing to act on the debt limit could lead to severe repercussions for the financial system and undermine America’s security and global leadership.