Treasury Secretary Jack Lew broke the news to Congress in a letter on Wednesday and said the US would run out of borrowed money on October 17, leaving only $30 billion in cash.
It typically costs about $60 billion a day to keep the US government up and running.
"If we have insufficient cash on hand, it would be impossible for the United States of America to meet all of its obligations for the first time in our history," Lew wrote.
The deadline puts Congress under extra pressure to raise the $16.7 trillion debt limit and pass a spending bill to keep the government funded past the start of the new fiscal year on October 1.
The US reached the debt ceiling limit in May and has been funding the government through a patchwork of temporary measures since then.
If Republicans and Democrats can't put a deal together before the deadline, the US risks defaulting on its debt.
"If the government should ultimately become unable to pay all of its bills, the results could be catastrophic," Lew said.
The Bipartisan Policy Center estimated that market concerns over a potential default in 2011 cost nearly $19 billion over 10 years.
Republicans in the House are trying to use the debt ceiling debate as leverage to cut funding to President Obama's signature healthcare law.
Senator Ted Cruz (R-Tx) took to the floor on Tuesday afternoon for an all-night filibuster trying to convince his colleagues in the Senate not to pass any spending bill that does not cut funding for Obamacare.
Sen. Cruz finally sat down after 21 hours and 19 minutes of talking but failed to convince colleagues in the Democratically-controlled Senate to de-fund the healthcare law.
Neither party seems any closer to a compromise on how to solve the budget impasse.
As Ezra Klein noted in the Washington Post on Tuesday, not only do the two sides disagree, "(t)hey hold mutually exclusive positions that neither can abandon without sparking an overwhelming backlash from their base and seriously harming their credibility in negotiations going forward."