The United States is inching closer to its debt limit, known as the “X-date,” when the country might not have enough money to pay all its bills. According to a report from the Congressional Budget Office (CBO) on Wednesday, this could happen as soon as August if lawmakers and the White House fail to reach an agreement.

The U.S. Treasury Department has been using special accounting maneuvers, called “extraordinary measures,” to keep the government running despite reaching the $36.1 trillion borrowing limit. However, once these measures run out, the country could risk defaulting on its debt.

Without a deal, the U.S. government might struggle to pay millions of people, including Social Security beneficiaries, veterans, and military families. Other essential services, like air traffic control and food safety operations, could also face disruptions.

The debt ceiling was reinstated on January 2 after Congress had temporarily suspended it through the Fiscal Responsibility Act of 2023. 

President Donald Trump had insisted that any deal to avoid a government shutdown must address the debt ceiling. In December, he said, “Anything else is a betrayal of our country.” However, that agreement did not include a solution to the debt limit issue.

The House has proposed raising the debt ceiling by $4 trillion as part of a Republican budget plan, which also aims to extend tax cuts from Trump’s first term. But the Senate must approve this, and it’s uncertain whether they will. Talks between Republican leaders and President Trump are ongoing, with the latest meeting held at the White House on Tuesday.

Democrats have expressed willingness to work with Republicans to avoid a financial crisis, but are pushing back against proposals they believe would harm essential programs.

“Democrats are ready to work across the aisle to prevent a catastrophic default. But Republicans must work with us to protect Social Security, Medicare, and Medicaid,” said Pennsylvania Representative Brendan Boyle, the top Democrat on the House Budget Committee.

The CBO has warned that if no action is taken, the government may exhaust its ability to borrow money by August or September 2025. This timeline depends on how much money the government collects and spends in the coming months.

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