Treasury Predicts August “X-date” for Debt Ceiling Deadline, Urges Congressional Action by Mid-July

If Congress fails to act, government payments could be halted, and the economy could suffer

The U.S. is heading toward a critical fiscal deadline this summer, with Treasury Secretary Scott Bessent warning lawmakers that unless Congress acts to increase or suspend the debt limit, the government may not have sufficient funds to cover all its bills by August. The so-called  “X-date” is the day when the federal government will reach the debt ceiling and be unable to continue to fully function financially.

In a May 9 letter to Congress, Bessent cited weaker than expected April tax revenue to have shifted the projected X-date to sometime in August, when Congress is set to take its annual recess. As a result, he is urging Congress to act by mid-July to prevent the government from reaching the debt ceiling.

If no action is taken before August, the federal government is expected to have issues paying Social Security benefits, interest on the national debt and federal workers’ salaries.

“Waiting until the last minute can have serious consequences,” Bessent said.  He added that waiting could alter the stock market, hurt consumer confidence and possibly trigger a recession.

To address the looming deadline, House Republicans have included a $5 trillion debt limit increase as a part of a broader budget reconciliation package that also includes tax reforms and spending cuts. This package would also allow Republicans to bypass a filibuster in the Senate and pass the proposal with a simple majority. The $5 trillion increase is designed to push the next debt limit deadline beyond the 2026 midterm elections.

However, passage of the broader package remains uncertain. If negotiations between the House and Senate stall and no final reconciliation is reached before the X-date, Congressional leaders may be forced to consider alternate approaches, such as a stand-alone debt ceiling bill or including it in other must-pass legislation. In the Senate, where the Republican party currently holds 53 seats, any stand-alone or non-reconciliation bill would require at least seven additional Democratic votes to clear the threshold.

Meanwhile, the fiscal picture remains challenging. The Congressional Budget Office (CBO) reported on May 8 that the federal deficit has already reached $1.1 trillion in the first few months of 2025’s fiscal year, up $196 billion from the same period last year. The CBO continues to project a $1.9 trillion deficit for the full year, matching the total from 2024’s fiscal year.

As the deadline nears each day, immense pressure has been placed on Congress to act. Lawmakers have only a few months to avoid default and suspend the debt limit before the economy and federal government lose all stability.

“Every one or two years, Congress must act to raise the nation’s borrowing limit, and failure to do so would be catastrophic to global financial markets,” said Moutray McLaren, ICSC Senior Vice President, Public Policy at ICSC. “[However], we are pleased that House and Senate Leadership have included a debt limit increase in the current reconciliation bill moving through Congress.”