Treasury Secretary Steven Mnuchin told congressional leaders that the debt ceiling should be raised before lawmakers leave for their August recess to avert the potential of an unprecedented default on the national debt.
In a letter to House and Senate leaders Friday, Mnuchin said that based on updated projections, “there is a scenario in which we run out of cash in early September, before Congress reconvenes.”
The notification comes one day after House Speaker Nancy Pelosi said she wanted an agreement this month with President Donald Trump on raising the borrowing limit and setting spending levels for the coming budget year.
The Bipartisan Policy Center, a centrist research organization, projected this week that lower-than-expected federal revenues this year could leave the government without the cash it needs in early September.
“Weaker-than-expected corporate income tax collections, in particular, seem to be related to the 2017 tax cuts,” the BPC said in its report Monday.
Since early March, Mnuchin has been using a variety of emergency measures that other Treasury secretaries have also employed to avoid running out of the funds needed to keep the government operating and to cover interest payments on the $22 trillion national debt.
The debt limit had been suspended for a year under a 2018 budget deal, allowing the government to borrow as much money as it needed to keep operating.
But once the limit went back into effect in early March, the Treasury has had to tap government pension funds and employ other maneuvers to create room for more borrowing without hitting the $22 trillion limit.
The U.S. government has never missed a debt payment. A budget battle between President Barack Obama and congressional Republicans in 2011 pushed approval of a debt limit increase so close to a default that the Standard & Poor’s rating agency downgraded a portion of the country’s credit rating for the first time in history.
“Since there is a reasonable uncertainty in projecting government cash flows, it is impossible to identify precisely how long extraordinary measures will last,” Mnuchin wrote. “I request that Congress increase the debt ceiling before Congress leaves for summer recess.”
The House is due to leave town for a six-week recess on July 26 and the Senate departs seven days later, raising concerns about whether there is enough time to reach a deal on the debt limit and the budget before then.
Separately, the Treasury Department on Friday released a list of questions for the 24 institutions that serve as primary dealers on Wall Street for the government’s bond auctions.
One series of questions seeks to determine how the bond market would prefer to handle the debt auctions that will be needed to rebuild the government’s cash balance once the borrowing limit is raised.
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