The United States is facing a critical financial situation, with Treasury Secretary Scott Bessent warning that the country could default on its obligations by the end of summer. In a letter to Congress, Bessent urged lawmakers to raise or suspend the debt ceiling, a cap on how much the government can borrow, to avoid running out of money to cover federal expenses. The country hit its current debt limit of $36.1 trillion in January, and since then, the total US debt has risen to $36.2 trillion.
To prevent default, the Treasury has relied on “extraordinary measures,” such as pausing payments into civil service retirement funds, to continue meeting its obligations. However, these measures are expected to run out by August, when Congress is scheduled to recess. Bessent has called on lawmakers to finalize a package to raise the debt limit by mid-July, warning that missing this deadline could leave the government without options to stave off default.
The consequences of default would be severe, Bessent warned. “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,” he said. Waiting until the last minute to address the debt limit could also have serious adverse consequences for financial markets, businesses, and the federal government, harming business and consumer confidence and raising borrowing costs for US taxpayers.
Republicans have been working on a legislative package that would raise the debt limit by up to $5 trillion, largely by extending and expanding President Donald Trump’s 2017 tax cuts. However, negotiations are progressing slowly, and it is unclear whether a deal can be reached before the mid-July deadline. The Congressional Budget Office has projected that the emergency measures will be exhausted in August or September, adding urgency to the situation.
The debt ceiling has been raised three times under former President Joe Biden, and Trump has argued that the cap should be abolished entirely, calling it pointless if it’s routinely lifted. Despite the challenges, Bessent has pledged that a default will be avoided, saying, “The US government will never default.” He assured lawmakers that the Treasury will make sure that the debt ceiling is raised, but it remains to be seen whether Congress can come to an agreement in time to prevent a financial crisis.
