Treasury Extends Debt Ceiling Measures to July 24 2025, Urges Congress to Act

The US Treasury has announced that it will continue to employ emergency accounting measures to prevent breaching the debt ceiling until July 24, 2025. This extension provides lawmakers with additional time to address the issue before the government's funds are depleted. Treasury Secretary Scott Bessent has urged Congress to take action before the August recess, cautioning that court decisions on Trump-era tariffs could accelerate the projected deadline for when the government runs out of money, known as the X-date.

Bessent has extended the period during which the government can use "special accounting measures" to stay within the legal debt limit. These measures allow the Treasury Department to temporarily shift funds between federal accounts and pause investments in certain government programs. This extension also delays the issuance of new debt, prolonging the so-called "debt issuance suspension period" through July 24, 2025.

In a formal letter addressed to House Speaker Mike Johnson and other key congressional leaders, Bessent emphasized the importance of these measures in allowing the government to continue making payments without exceeding its borrowing authority. He reiterated his warning from May, urging Congress to quickly raise or suspend the debt ceiling before the August recess. While these special measures provide temporary relief, they do not address the underlying problem.

Bessent also highlighted the potential consequences of exhausting the Treasury's ability to pay the government's bills on time. He warned that this could shake investor confidence and damage the US government’s credit rating. The letter puts additional pressure on Republican leaders in both the House and Senate, who have been working to finalize a massive tax and spending package but have faced internal disagreements over funding priorities.

The Treasury may soon run out of tools to manage government payments, which could push the US closer to a financial crisis if lawmakers do not pass the package or delay action on the debt ceiling. The longer lawmakers delay, the higher the risk of market volatility and the more challenging it will be to calm public and investor fears.

Legal battles surrounding tariffs imposed during the Trump administration could also impact the debt ceiling deadline. These tariffs have been a significant source of short-term federal revenue, generating $23 billion in customs duties to boost the Treasury’s cash reserves. However, a recent court ruling determined that some of these tariffs exceeded presidential authority and lacked a valid legal basis. The Treasury may be forced to halt the collection of certain tariffs and issue refunds for duties already collected.

These court decisions could affect the government’s cash position and ability to delay a debt limit breach using internal workarounds. The ripple effects could include a loss of incoming revenue and an actual outflow of funds at a critical time. A sudden drop in this revenue due to court-ordered changes could bring the X-date closer by weeks, leaving Congress with less time to act than current projections suggest.

Meanwhile, the US Treasury Department has hinted that it may soon abolish the controversial "revenge tax" as international tax talks led by the OECD make progress. Michael Faulkender, the deputy Treasury secretary, indicated that a global agreement could make a US proposal called Section 899, which is a provision against countries with a digital tax, unnecessary. Section 899, added during the Trump administration, is widely viewed as retaliatory and would levy tax penalties on companies and investors in countries the US believes discriminate against American technology giants with digital services taxes. Several US allies, such as Canada, France, and the United Kingdom, have adopted some of these taxes.