While the US Congress scrambled to introduce a spending bill to avoid a government shutdown, US President-elect Donald Trump shocked many lawmakers by demanding that any such bill also increase the country's debt ceiling.
He insisted that any agreement must include a debt ceiling provision, a legal limit on the amount of public debt a country can take on. This is a problem that never existed discussed by either party.
Trump then went a step further and announced: to the surprise of many lawmakersthat he also sought to suspend or lift the debt limit before taking office in January.
However, Trump's plans suffered a setback on Friday evening with the US House of Representatives controlled by Republicans passed legislation this would have avoided a midnight government shutdown, but sidestepped his demand for a higher debt ceiling.
So why is Trump suddenly so concerned about the debt ceiling?
Hours before the deadline, the U.S. House of Representatives passed short-term legislation aimed at avoiding a government shutdown and approved tens of billions of dollars in disaster relief.
What is the debt ceiling?
The debt ceiling is the limit on a country's debt. If the government needs to borrow more than this amount, it must obtain congressional approval to do this.
As the government runs up deficits – spending more money than it generates in taxpayer revenue – it regularly has to borrow money and raise the debt limit.
This money is needed so that the government can meet its existing legal obligations, including paying Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds and other payments.
Many economists predict dire consequences of a default that could include a downgrade in credit ratings, a negative impact on debt and the dollar, potential devastation in financial markets, and job losses in the thousands, if not millions – all of which could lead to a recession.
Why is this so political?
Almost since its introduction in 1917, the debt ceiling has been politicized by both parties, but since 2011 it has become not only partisan but dangerous, says Laura Blessing, an assistant professor and senior fellow at the Institute of Governmental Affairs at Georgetown University.
The biggest problem with the ceiling, some observers say, is that it has become a dangerous political bargaining chip that holds the economy hostage in order to enforce political demands.
“The situation is that the Republican Party has been happy to use this as a cudgel to try to force Democrats into a legislative deal that would cut spending, which is their policy priority,” Blessing said. “And they weren't particularly successful at it“
Days before the deadline, the US government reached a tentative agreement to raise the debt ceiling. Almost every year, this puts the country – and the world – on the brink of economic disaster due to the debt ceiling being breached. Andrew Chang explains what the debt ceiling is and what would happen if it were not raised.
What does Trump say about the debt ceiling?
On Wednesday, Trump, in a joint statement with Vice President-elect J.D. Vance, said that “increasing the debt ceiling is not a big deal, but we would prefer to do it under Biden.”
“If Democrats won't cooperate on the debt ceiling now, what makes anyone think they will in June, under our administration?”
The next day, Trump spoke to multiple U.S. media outlets, warning of a government shutdown unless Congress extended the debt ceiling or lifted it altogether. In an interview with NBC News, Trump said that getting rid of the debt ceiling completely would be “the smartest thing (Congress) could do. I would totally support that.”
“The Democrats said they wanted to get rid of him. “If they want to get rid of him, I would be leading the charge,” Trump said.
On Friday, Trump posted on his social media platform Truth Social: “Congress must get rid of the absurd debt ceiling or extend it perhaps until 2029. We should never make a deal without it. Remember, the pressure is on whoever is president.”
It is true that some Democrats have supported lifting the debt ceiling, including Massachusetts Sen. Elizabeth Warren, who took to social media on Thursday to say she agrees with Trump “that Congress should lift the debt ceiling and never again govern by taking hostages.” “. “
Yet many Republicans steadfastly supported the debt ceiling. That's why Trump's comments are what Blessing calls a “record breaking moment” because he's asking Republicans to give up this tool.
“It just goes against the message. The policy attempts, the strategy they are using,” she said.
So why does Trump want to eliminate the debt ceiling?
As Trump prepares to push an agenda of tax cuts and border security, Trump fears that next year's fight over the debt ceiling could derail his plans, which are is expected to cost trillions of dollarswrote New York Times reporter Alan Rappeport, who has covered the debt ceiling fights under Trump and Biden.
“It has nothing to do with serious political ideology and everything to do with power,” said Todd Belt, professor and program director at the Graduate School of Political Management at George Washington University in Washington, D.C.
Republicans like to have a debt ceiling so they can force concessions and spending cuts when they are in the minority, he said.
“But they fear that when the shoe is flipped over, with Republicans in the majority, Democrats will be able to use it to thwart the tax cuts that Donald Trump wants to push.”
These tax cuts and other Trump spending priorities will mean less federal money to cover the debt, and that's why Trump wants to eliminate the debt ceiling, Belt said, noting that the reason the president-elect insisted it happen now was because he wouldn't I don't want to be blamed for giving away money.
“I want to be able to say this is something Joe Biden signed, not me.”
Does this mean the debt ceiling is doomed?
Probably not anytime soon.
While Trump and a handful of Democrats have called for his elimination, there doesn't appear to be much political will or votes to eliminate him, Belt said.
“Plus, there are staunch Republicans who want to maintain the debt ceiling because they truly believe they were sent to Washington to shake up the system and put an end to excessive spending,” he said.