On Friday, Treasury Secretary Steven Mnuchin told House Speaker Nancy Pelosi (D-Calif.) that the federal government was in danger of running out of money by September if Congress did not raise the debt ceiling.
Why is the government running out of money?
The federal government has been running up huge deficits as its spending far surpasses the amount of revenue it raised. This month, the federal deficit hit $747.1 billion, with three months still to go in the fiscal year. The White House predicted that it would reach $1.09 trillion by the end of 2019, and remain over $1 trillion every year until at least 2022.
The only other time in U.S. history that the deficit surpassed $1 trillion was between 2009 and 2012 when the Obama administration enacted bailouts and other counter-recession measures. In 2013, the deficit dropped back down to $680 billion.
The debt ceiling is a limit to how much money the government can borrow. Congress periodically raises the debt ceiling if the government nears this limit, but the negotiations involved in this process can take months. If Congress fails to raise the debt ceiling before the federal government hits this limit, the government will shut down.
What did Mnuchin say?
"We model various scenarios for cash projections. Based on updated projections, there is a scenario in which we run of out cash in early September, before Congress reconvenes," Mnuchin wrote to Pelosi. He asked "that Congress increase the debt ceiling before Congress leaves for summer recess."
Congress recesses every year during August.
Politico reported that both Pelosi and Senate Majority Leader Sen. Mitch McConnell (R-Ky.) were open to raising the debt ceiling, but they will have limited time to do so within the timeline set by Mnuchin.