The US Treasury Secretary warns of the danger of the debt ceiling and calls on Congress to act swiftly.
US Treasury Secretary, Scott Besent, warned of the danger of the United States reaching the maximum allowable borrowing limit by next August, coinciding with the summer recess of Congress, urging lawmakers to take urgent action to avoid any serious financial consequences.
Besent's warning came in a letter addressed to House Speaker, Mike Johnson, stating: "I respectfully urge Congress to raise or suspend the debt ceiling by mid-July, before the start of its scheduled recess, in order to protect the full faith and credit of the United States."
Besent pointed out the "significant uncertainty" about the exact date when government funds will be exhausted, but clarified that "after receiving tax filing receipts in April, there is a reasonable possibility that federal government funds and extraordinary measures will be exhausted in August, while Congress is expected to be on recess."
The current US public debt stands at $36.2 trillion, according to Treasury Department data, equivalent to over 120% of the Gross Domestic Product.
With government spending continuing to exceed revenues, Congress must approve an increase in borrowing to avoid default, a scenario that could lead to widespread economic disruptions.
Interest burdens on US debt are at their highest levels since the 1990s, increasing the financial policy pressures on the incoming administration.
Republicans, who control both the House and Senate, seek to raise the debt ceiling by $4 to $5 trillion as part of a comprehensive bill to support President Donald Trump's agenda. However, the task faces significant challenges due to internal party disputes and the difficulty of achieving consensus with a slim majority. It remains unclear whether Congress will be able to pass the legislation before the deadline.
It is worth noting that a survey conducted by the Federal Reserve last year indicated that "debt burden may be one of the most significant threats to financial sector stability."
