(FILES) A graphic shows the rising current US national debt as Federal Reserve Chair Janet Yellen testifies before the House Financial Services Committee on Capitol Hill in Washington, DC, November 4, 2015. There is a "reasonable probability" the US will hit its borrowing limit in August when Congress is in recess, US Secretary of Treasury Scott Bessent said on May 9, 2025, calling on lawmakers to act. "I respectfully urge Congress to increase or suspend the debt limit by mid-July, before its scheduled break, to protect the full faith and credit of the United States," he wrote in a letter to US Speaker of the House Mike Johnson. (Photo by Jim WATSON / AFP)
Washington: Treasury Secretary Scott Bessent has told US lawmakers that his department’s ability to use special accounting maneuovers to stay within the federal debt limit could be exhausted in August.
Bessent, in a letter to House Speaker Mike Johnson, said that “after reviewing receipts from the recent April tax filing season, there is a reasonable probability that the federal government’s cash and extraordinary measures will be exhausted in August while Congress is scheduled to be in recess.”
Bessent urged Congress to “increase or suspend the debt limit by mid-July, before its scheduled break, to protect the full faith and credit of the United States”.
That timeline puts pressure on Republicans to quickly agree on a giant tax and spending package in the coming weeks – the legislative vehicle to which they’ve attached a US$5 trillion boost in the debt ceiling.
The new August timeline for extraordinary measures effectively serves as a deadline for Congress to pass President Donald Trump’s signature economic package.
Bessent has previously said work on that package should be completed by July 4, though Senate majority leader John Thune has called such a deadline aspirational.
The US hit its current statutory limit of US$36.1 trillion at the start of January, and the Treasury has been using so-called extraordinary measures to stave off a possible default on federal obligations.
Bessent’s new timeline reflects the department’s most recent estimate as to when those measures, along with its cash stockpile, will run out.
The Treasury had used the vast majority of its special measures as of May 7, according to a previous statement from the department.
Wall Street analysts surveyed by Bloomberg recently saw August to October as the period during which the Treasury would run out of cash to pay the US’s obligations on time.
The head of the Congressional Budget Office, Phillip Swagel, said earlier this month that the non-partisan arm of the legislature still estimates that point coming “late in the summer – into August, into September”.
If GOP lawmakers are unable to get that done in time, they would need to negotiate with Democrats – offering the opposition party leverage to potentially rein in some of Trump’s initiatives.
During congressional stand-offs over debt limits in the past, investors have tended to dump the Treasury bills most vulnerable to a potential default, in favour of securities maturing before or after the so-called X-date when the department’s cash and extraordinary measures run out – creating a kink in the curve.
Last Friday’s news came out late in the trading day, however, and there was no immediately obvious such kink.
Bessent has repeatedly pledged that the United States would avoid any default, starting with his confirmation hearing at the Senate in January.
“The United States government will never default,” the Treasury chief said at a House Appropriations Committee hearing. “The Treasury will not use any gimmicks. We will make sure that the debt ceiling is raised.”
Trump has previously expressed interest in eliminating the debt ceiling entirely, but many debt hawks within the Republican party have a different view of the mechanism and have vowed they won’t vote to raise it. — Bloomberg
