U.S. Treasury Secretary Scott Bessent has issued a stark warning to Congress: raise the federal debt ceiling by mid-July or face the risk of default. In a letter to congressional leaders on Friday, Bessent highlighted the growing urgency, stating there’s a “reasonable probability” that the government could run out of money by August if action isn’t taken.
Deadline Approaches As Government Nears Limit
The federal debt has already surpassed the $36.1 trillion ceiling set by lawmakers in January, currently standing at $36.2 trillion. The Treasury Department has been relying on “extraordinary measures” to stay afloat, but Bessent noted these temporary tools are running out.
“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,” Bessent warned.
Political Standoff in Congress
The issue has become a political flashpoint. Republicans, who currently control both chambers of Congress, are pushing for a sweeping fiscal package that combines tax cuts, increased spending, and a raise in the debt limit by at least $4 trillion.
Their goal is to pass this package by July 4, but given past standoffs, markets are bracing for another round of last-minute negotiations. Historically, these episodes have rattled investor confidence and led to warnings from major credit rating agencies about the reliability of U.S. debt.
Global Markets on Edge
The implications of a default would extend far beyond U.S. borders. With Treasuries serving as a benchmark for global finance, any disruption could trigger volatility across bond, currency, and equity markets. It could also jeopardize the dollar’s role as the world’s reserve currency.
Lawmakers on both sides of the aisle acknowledge the stakes, but compromise has been elusive. Bessent’s letter may serve as a wake-up call, urging Congress to act swiftly before the financial system reaches a tipping point.