US encounters default by August
(MENAFN) U.S. Treasury Secretary Scott Bessent has cautioned that the country could default on its financial obligations by the end of summer unless Congress acts to raise or suspend the debt ceiling. In a letter to House Speaker Mike Johnson on Friday, Bessent urged lawmakers to take action by mid-July, ahead of their scheduled recess, to avoid a crisis.
The U.S. hit its current borrowing cap of $36.1 trillion in January, and the national debt has since grown to $36.2 trillion. To delay default, the Treasury has employed emergency accounting measures, such as halting payments into certain government retirement funds. However, these temporary tactics are expected to be exhausted by August, according to projections by both Bessent and the Congressional Budget Office.
Republicans have reportedly been drafting a bill to raise the debt ceiling by up to $5 trillion, tied to an expansion of Donald Trump’s 2017 tax cuts. But negotiations are slow-moving and could take several more months.
Bessent warned that failure to act in time could severely impact financial markets, consumer confidence, and U.S. global standing. He stressed that delays in raising the debt ceiling would drive up borrowing costs for taxpayers and risk economic instability.
Despite the looming threat, Bessent assured lawmakers during a recent House Appropriations Committee hearing that the U.S. government will not default, pledging that the Treasury will ensure the debt ceiling is increased.
Former President Trump has called for the debt ceiling to be eliminated altogether, arguing it is ineffective if Congress continues to raise it regularly.
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