Treasury Secretary Scott Bessent prepares to testify before the Senate Finance Committee during his confirmation hearing  in the Dirksen Senate Office Building on Capitol Hill on Jan. 16, 2025, in Washington, D.C.  (Photo by Chip Somodevilla/Getty Images)

WASHINGTON — The Treasury Department announced Friday that Congress must address the debt limit before August, setting a firm deadline for Republicans to wrap up work on the “big, beautiful bill” that will raise the nation’s borrowing limit by up to $5 trillion.

Treasury Secretary Scott Bessent wrote in a letter to congressional leaders that “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.

“Therefore, 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.”

The projection marks the first time the Trump administration has weighed in publicly on when the government will likely reach default since the last suspension expired in January. 

In the months since then, the Treasury Department has used accounting maneuvers known as extraordinary measures to pay all of the country’s bills in full and on time.

Treasury’s projection is similar to a report the nonpartisan Congressional Budget Office released in March predicting the country would reach default in August or September unless Congress acted before then.

Reconciliation package

Republicans are hoping to lift the debt limit without having to negotiate a bipartisan agreement with Democrats, which is typically how lawmakers have addressed the debt limit during the past couple decades.

GOP leaders plan to raise the debt limit by between $4 trillion and $5 trillion in the 11-bill reconciliation package they’re using to address tax law, overhaul higher education aid and cut federal spending.

Speaker Mike Johnson, R-La., expects his chamber will vote on that legislation before the end of May, though Senate leaders haven’t put a timeline on when they’d bring the bill to the floor in that chamber.

GOP senators are likely to propose several amendments to the package, and any changes by the Senate would require the bill to get a final sign-off in the House before it could head to President Donald Trump’s desk.

The Treasury Department’s projection that a debt limit default will likely take place if no action is taken before August puts a firm deadline on when Republicans will need to reach final agreement.

Caution against waiting

Bessent also cautioned lawmakers against waiting until the last minute to get their work done.

“Prior episodes have shown that waiting until the last minute to suspend or increase the debt limit can have serious adverse consequences for financial markets, businesses, and the federal government, harm businesses and consumer confidence, and raise short-term borrowing costs for taxpayers,” he wrote. “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.”

A default on the country’s debt would limit the federal government to spending only the money it has on hand, likely leading to delayed, incomplete, or nonexistent payments on thousands of programs, including Social Security, Medicare, Medicaid, troop pay, veterans benefits and nutrition programs, among many others.

It would also lead to a downturn in the global economy with a recession being among the better scenarios.

A default is vastly different from a partial government shutdown and would lead to more significant consequences for federal spending and the economy.