The United States Congress has until midnight on Friday to pass a resolution to raise the country's borrowing limit, also known as the debt ceiling, without which large parts of the government would be out of business.
The law that would have extended the deadline until March 14, prepared by Democrats and Republicans, fell apart after President-elect Donald Trump announced his opposition on Wednesday, following the efforts of the billionaire ally. Elon Musk raising objections.
Republicans have indicated that a new bill has been agreed upon and a vote could take place on Thursday evening, but it remains unclear whether it will pass both houses of Congress.
What is the debt ceiling, why is it controversial, and what does the latest news tell us about Musk and his growing influence in US politics?
What is the loan amount?
The debt ceiling is the interest rate set by the US Congress on the amount of money the government can borrow to cover the gap between its income and spending.
How often is the loan amount increased?
The U.S. has raised the debt 103 times since 1939, and it has been in U.S. politics many times.
A failure to raise the debt would mean the US Treasury could have trouble paying the country's debts, which could disrupt financial markets around the world and damage the country's supply chain.
When did the issue of debt become critical?
In 1995 and 1996, the Republican-controlled Congress, led by Speaker of the House of Representatives Newt Gingrich, used the prospect of allowing the debt to expire to push for additional spending cuts from then-President Bill Clinton.
Although often set up as a way to manage the economy, debt negotiations have become a political opportunity for parties – often in the minority – to use their power to oust rival parties or the president. There may also be times when opposing factions within the party clash over important issues.
One such conflict occurred between December 2018 and January 2019, during Trump's first term in office, when Republicans passed the COVID-19 bill while insisting on measures to combat immigration.
The shutdown was the longest in US history and is seen as politically damaging for Trump and Republicans.
What role is Trump taking in the current negotiations?
The president-elect has a lot of influence over the Republican establishment, and his announcement of opposition to the bipartisan debt bill on Wednesday was enough to ensure his death.
What does Trump want to see instead?
It's not clear what changes Trump wants to make to the bill. But he has said that he wants the difficult political question of renegotiating the debt to be removed from his second term in office. In a television program on Thursday, he said that the debt could be completely canceled.
What will Republican lawmakers do now?
Both Trump and Musk have warned Republican lawmakers of the consequences if they support the bipartisan bill. Some lawmakers were shocked, saying Trump had undermined their efforts by stepping in at the last minute to end negotiations.
“President Trump's last-minute request to cancel the debt is throwing a whole other issue into the debate,” said Senator Susan Collins, the top Republican on the Senate Appropriations Committee.
Trump's intervention has also put the Speaker of the Republican House Majority Mike Johnson under pressure, as he scrambles to strike a deal and avert a government shutdown without upsetting the incoming Republican president just weeks before he will refocus his battle to retain the presidency.
“Anyone who supports a bill that doesn't take care of a Democrat known as the debt ceiling needs to be fixed and thrown out immediately,” Trump told Fox News Digital.
What did Elon Musk do?
Billionaire tech mogul Elon Musk, who has been identified as a key ally of Trump and a powerful donor in the Republican Party, took to social media to oppose the bill, which he described as too expensive.
“My phone was ringing,” Republican Representative Andy Barr said Wednesday. “The people who elected us are listening to Elon Musk.”
What does this say about the role Musk is taking out of the Trump administration?
Musk has positioned himself as an opponent of government spending and regulation. He is ready to head called the Department of Government Efficiency (DOGE) in the incoming Trump administration, which will seek to cut $2 trillion in federal funds from the annual budget.
If Musk portrays himself as anti-government, many Democrats see something else: the richest man in the world. the user of his powerwithout elected office, reforming the government in favor of private companies.
What do the Democrats say?
Democrats have used the sudden collapse of the bipartisan bill to signal to the Republican Party that it is willing to put its loyalty to Donald Trump and billionaires like Elon Musk above their roles as lawmakers.
“The imprudent shutdown led by Republicans can be avoided,” Democratic House Leader Hakeem Jeffries said, adding that Republicans “must do what is right for the American people and follow through on the deal they negotiated”.
Some have said that activists pushing to cut the programs are also planning to extend the tax cuts from Trump's first term, which have benefited the super-rich.
Doing so would cost the government $4 trillion in lost revenue over the next 10 years, adding to the current $36 trillion debt.
Democrats are likely to respond positively to Trump's proposal to end the debt ceiling, which Republicans have been using as an opportunity to push social welfare programs.
“I agree with President-elect Trump that Congress needs to end the debt and not take control and take away people,” Senator Elizabeth Warren said Thursday.