Treasury Secretary Steven Mnuchin warned House Speaker Nancy Pelosi that the government may run out of cash in early September if Congress doesn’t raise U.S. borrowing authority.
“Based on updated projections, there is a scenario in which we run out of cash in early September, before Congress reconvenes,” Mnuchin said in a letter to Pelosi on Friday. “As such, I request that Congress increase the debt ceiling before Congress leaves for summer recess.”
Pelosi said Thursday that Congress should act this month to raise the debt ceiling, which was the first time she offered a definitive timeline. It’s not clear that lawmakers and the White House will strike a deal before the House is set to leave town on July 26 for a six-week recess.
Mnuchin and Pelosi spoke twice about the debt limit on Thursday and may resume talks on Friday.
Congressional leaders have acknowledged this week that waiting until September to raise U.S. borrowing authority increases the prospects of an unprecedented default. Lawmakers are scheduled to be back in Washington Sept. 9.
Republicans, Democrats and Trump administration officials have intensified their negotiations this week, and all sides say a deal will get done.
The Treasury has been using accounting measures to avoid missing payments since the borrowing limit snapped back into place on March 2. The department’s room to maneuver depends on tax revenue, and the Bipartisan Policy Center, an independent think tank, this week adjusted its estimate to say there is a “significant risk” of defaulting on a key payment in early September.
Mitch McConnell and Kevin McCarthy, the Republican leaders in the Senate and House, also say Congress should raise the debt limit this month.
House Democrats have been trying to leverage the debt ceiling bill to increase federal spending caps, and they were looking to negotiate those caps after their August recess.
That budget deal, which would cover two fiscal years, aims to avoid an automatic $126 billion cut at the end of the calendar year. Such an agreement would help the government avoid another shutdown when funding runs out Oct. 1.
If the combined debt ceiling and budget deal continues to elude lawmakers, Democrats and Republicans have begun to talk openly of a short-term debt ceiling increase this month while budget talks continue.
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