US Treasury Secretary warns of possible debt default
U.S. Treasury secretary Warns Government Could Default by End of Summer
The U.S. Treasury Secretary, Scott Bascent, has warned that the federal government may face a default by the end of this summer, losing its ability to pay its debts. the report comes from the international economics desk of webangah news Agency, citing Tasnim News Agency and RT.
In a letter to Congress on Friday, Bascent urged lawmakers to agree on raising or suspending the debt ceiling, which limits government borrowing, to avoid a shortage of funds for federal expenditures.
The U.S. hit its legal debt limit of $36.1 trillion in January 2024. Once this ceiling is breached, the government can no longer borrow to meet its financial obligations fully and on time.
Official data shows that total U.S. government debt has now reached $36.2 trillion. Though, the treasury Department has temporarily avoided default by resorting to “exceptional measures,” such as halting payments to federal employee retirement funds temporarily.
Reports indicate that Republicans are drafting legislation to raise the debt ceiling by $5 trillion. The package also includes extending and expanding provisions from Trump’s 2017 tax cuts.
Though, recent reports suggest negotiations are progressing slowly and could take months.
Bascent stated there is a “reasonable likelihood” that Treasury’s emergency measures will be exhausted by August—when Congress begins its summer recess—and urged lawmakers to finalize legislation by mid-July; otherwise, he warned, default would become unavoidable.
In his letter addressed to House Speaker Mike Johnson, Bascent wrote: “I respectfully urge congress to raise or suspend the debt limit before mid-July—prioritizing full preservation of U.S creditworthiness.” He added that failure risks “severe damage to our financial system and weakening America’s global security leadership.”
Bascent further cautioned that waiting until the last minute could trigger severe market disruptions for businesses and households alike while increasing borrowing costs for taxpayers.
The Congressional Budget Office predicts these emergency measures will last until August or September before running out entirely under current projections.
