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Mnuchin Says Treasury Could Run Out of Cash in Early September

Treasury Secretary Steven Mnuchin said the government could run out of cash in early September, before Congress returns from its August recess, and urged lawmakers to raise the federal borrowing limit before they leave town at the end of the month.

In a letter to House Speaker Nancy Pelosi (D., Calif.) Friday, Mr. Mnuchin said it is impossible to identify precisely when the Treasury will exhaust its “extraordinary measures,” which it has been using to keep paying the government’s bills on time since March 2, when the debt ceiling was reinstated after a prior suspension.

“Based upon projections, there is a scenario in which we run out of cash in early September, before Congress reconvenes,” Mr. Mnuchin said. “As such, I request that Congress increase the debt ceiling before Congress leaves for summer recess.”

Mrs. Pelosi told reporters after speaking with Mr. Mnuchin on Thursday evening that she hoped to reach an agreement to raise the debt ceiling and set new spending levels before the House leaves Washington for the August break on July 26.

“I am personally convinced that we should act on the caps and the debt ceiling,” she said. “Prior to recess.”

The two were expected to speak again on Friday, according to an aide for Mrs. Pelosi.

The Treasury has been warning lawmakers since May that it may exhaust its ability to pay its bills in late summer. A new estimate released Monday by the Bipartisan Policy Center suggested the government could hit the X-datein the first half of September, raising pressure on lawmakers to suspend or raise the federal debt ceiling sooner than they had expected.

If the government can’t borrow more money, the U.S. could be unable to meet all of its obligations, including salaries, benefits and potentially, interest payments on federal debt. Such a default would have unknown financial and economic consequences, and lawmakers have walked right up to the deadline in the past but avoided breaching it.

The earlier debt-limit deadline has thrown a wrench in negotiations over where to set federal spending levels next year. Lawmakers have been assuming that a spending deal for the fiscal year beginning Oct. 1 would include a debt-limit increase.

Mrs. Pelosi has maintained that any debt-ceiling vote should be paired with a new budget deal to lift federal spending caps enacted in 2011. The current budget agreement is also set to expire Oct. 1.

President Trump met Thursday in the Oval Office with chief of staff Mick Mulvaney, acting budget chief Russ Vought and legislative affairs chief Eric Ueland to discuss the negotiations, said a person familiar with the White House efforts.

The White House has asked federal agencies to provide updated shutdown contingency plans by early next month, the person said, describing that request as standard practice.

Exactly when the government will hit the debt limit depends on the pace of revenue collection and spending over the next two months, which can be difficult to project.

Corporate tax revenue had been particularly weak through much of the fiscal year but bounced back in June, a month with significant estimated tax payments, the Treasury said Thursday. Overall, revenue collection increased 3% so far this fiscal year, while outlays have risen 7%, amid higher spending on the military and interest payments on the debt.