Sen. Ron Johnson, R-Wis., is discussing a future government shutdown as Congress struggles to pass a spending bill.
The United States is in danger of reaching an impasse debt limit Ratings agency Fitch warned in a report on Tuesday that as congressional Republicans face an unfettered majority in the House of Representatives.
“The United States faces significant policy challenges in 2025 related to debt ceiling, credit allocation, and tax cuts in the context of large deficits and rising debt burdens.” Fitch wrote. We think it is unlikely that raising or suspending the debt ceiling will be resolved in early 2025, given the significant disagreements over spending policies in Congress.
“The government shutdown before Christmas was only avoided at the last minute after a contentious debate over President-elect Donald Trump's insistence that the budget be tied to a new debt limit suspension/increase and disagreements over some spending items,” Fitch said. became. explained
Congress recently raised the debt limit in 2023, when Financial responsibility law Suspended the debt limit until January 1, 2025 and imposed a spending cap on discretionary spending. It will likely have to raise or suspend the new debt limit this spring or summer to prevent the federal government from defaulting on its debt.
The US national debt reached a new record: $36 trillion
Fitch predicted that Congress would have until July or August to act on the debt limit to prevent a default on the federal government's debt. (AFP/Getty Images)
Earlier this month, Ministry of Treasury The new debt limit is estimated to become binding between Jan. 14 and 23 — prompting the agency to use accounting maneuvers known as “extraordinary measures” to prevent defaults and finance federal obligations for a period of several months until When these tools are finished, use them. .
It is not clear exactly how long this is Great actions It will last, but Fitch analysts wrote that they believe the “x date” could fall as late as July or August, giving lawmakers a few months to deal with the debt limit.
Experts warn that the federal budget deficit is approaching $2 trillion and getting worse
Apart from the debt limit, Congress must pass a Government budget bill until March 14 to avoid a partial shutdown by passing a short-term continuing resolution or appropriations bills.
This discussion may include discussion of the expansion of powers Cost ceiling That expires in September and could come against the backdrop of negotiations over the 2017 tax cut extension and related reforms that Republicans plan to pursue through the budget reconciliation process.
The reconciliation process allows tax and spending legislation to bypass the Senate's 60 legislative votes and pass with a simple majority as long as the bill complies with special budget rules. Even with that option, it will be a challenge for Republican leadership to guide legislation through that process with slim House majorities.
Republicans in the House of Representatives They won 220 seats in the November election, giving them a five-seat majority over the Democrats. However, those ratings have fallen since the resignation of former House Rep. Matt Gatz, while two other GOP lawmakers have accepted roles in Trump's incoming White House.
The departure of these legislators will leave their seats temporarily vacant until special elections are held for their successors, leaving Republicans with only two seats in the interim term.
House Speaker Mike Johnson must contend with a narrow GOP majority as Congress grapples with various fiscal policy issues. (Eva Marie Uzcategui/Bloomberg via Getty Images/Getty Images)
Get FOX Business on the Move by clicking here
Fitch wrote that these dynamics could lead to a “busy period in the summer as policymakers try to finalize appropriations bills, raise or suspend the debt limit before x date, and over extend tax cuts in 2018.” 2017 to reach an agreement.”
“Our main assumption is that these issues will be resolved. But the absence of a unified budget process and the upcoming policy debate on additional tax cuts and spending adjustments amid a still challenging political backdrop means that important decisions are likely to be difficult.” It will be adopted, Fitch explained, on a case-by-case basis, highlighting the deterioration of US fiscal governance in recent years.