US Could Hit Debt Limit in August, Bessent Says

The treasury secretary urged Congress to raise the debt limit by mid-July before it goes into recess.

Treasury Secretary Scott Bessent speaks to reporters during a briefing at the White House on April 29, 2025. Travis Gillmore/The Epoch Times

The federal government is likely to exceed its statutory debt limit in August, when Congress is slated for a recess, according to Treasury Secretary Scott Bessent.

The timing of the so-called X date is likely to place added pressure on Congress to pass a much-anticipated sweeping policy bill within the next few weeks, which is expected to provide an increase in the borrowing limit and advance key parts of President Donald Trump’s agenda, including tax cut, border, and energy measures.

Bessent informed House Speaker Mike Johnson (R-La.) that there was a “reasonable probability” that the federal government would run out of cash in August.

“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,” Bessent wrote, noting that waiting until the last minute has proven to negatively affect financial markets and consumer confidence.

Johnson had hoped to pass the megabill by May 26, though the timing appears to have been delayed by a lack of agreement on spending cuts, particularly Medicaid funding, and tax measures.

Shortly after the debt limit—the maximum amount the government can borrow to cover its obligations—was reinstated on Jan. 2, the Treasury Department employed extraordinary measures. These efforts involved using the Treasury General Account at the Federal Reserve, halting investments in federal retirement funds, and prematurely redeeming existing investments.

Bessent also extended the debt issuance suspension period until the end of June.

In recent weeks, various estimates have pegged the X date to be reached this summer or early fall.

The Congressional Budget Office (CBO), a nonpartisan budget watchdog, noted that if the federal government’s borrowing needs exceed the CBO’s projections, it could be as early as late May or early June.

Experts have urged lawmakers to raise the debt ceiling in advance of the X date to avoid a default.

“Ideally, Congress should once again raise or suspend the debt ceiling alongside reforms that improve the nation’s fiscal trajectory, as it has done several times in the past,” the Committee for a Responsible Federal Budget, an independent policy organization, said in a report last month. “At the very least, policymakers should not attach any deficit-increasing measures to a debt ceiling increase.”

This comes as the Treasury Department raised its projection of borrowing in the current quarter.

According to the latest Treasury Refunding Estimate, the U.S. government plans to borrow $514 billion from April to June, up from the initial estimate of $123 billion in February.

In addition, the Treasury expects to borrow $554 billion in the July-to-September quarter.

Fiscal Year 2025 Update

In March, the U.S. government registered a budget deficit of $161 billion, a 32 percent decline from the previous year, according to the Monthly Treasury Statement. In the first half of fiscal year 2025, the shortfall has totaled $1.307 trillion, up 23 percent from the same period last year.

While tax revenues have been slightly higher so far this fiscal year compared to 2024, outlays have also been larger. Spending has been driven by Social Security ($775 billion), net interest payments ($489 billion), health ($478 billion), and Medicare ($469 billion).

The International Monetary Fund (IMF) said last week that the U.S. federal deficit could tumble to 6.5 percent of gross domestic product this year, down from 7.3 percent in 2024.

In the IMF’s latest Fiscal Monitor report, economists stated that the drop would be “contingent on higher tariff revenues,” adding that “the tariff schedule itself is uncertain plays a crucial role” in their calculations.

The report factored in President Donald Trump’s April 2 announcement but excluded recent trade actions, including the 90-day pause on reciprocal tariffs and exemptions on technology imports.

As of April 24, the U.S. government has collected $15.9 billion in “customs and excise taxes” this month.

Debt financing could also be critical to the U.S. government’s finances. If the national debt continues to increase, longer-term interest rates will increase, bolstering debt-servicing payments.

“Specifically, an increase of 10 percentage points of GDP in U.S. public debt between 2024 and 2029 could lead to a 60-basis-point rise in the 5-year forward to 10-year rate,” the report stated.

The benchmark 10-year yield was highly volatile in April, trading between 3.99 percent and 4.5 percent.

The national debt sits at around $36.2 trillion.