As Congress scrambled to come up with a spending bill to prevent a government shutdown, U.S. President-elect Donald Trump shocked many lawmakers by demanding that such a bill also raise the country’s debt ceiling.
He insisted that any deal must include a provision on the debt ceiling, the legal limit on the amount of national debt the country can take on. It’s a problem that has never existed before be discussed by both parties.
Trump then went one step further and announced: to the surprise of many lawmakersthat he would also aim to suspend or abolish the debt limit before taking office in January.
However, Trump’s plans suffered a setback on Friday evening when Republicans controlled the US House of Representatives passed laws that would prevent a government shutdown at midnight, but ignored his call for a debt ceiling increase.
Why is Trump suddenly so worried about the debt ceiling?
Hours before the deadline, the US House of Representatives passed short-term legislation to avert a government shutdown and approved tens of billions of dollars in disaster aid.
How high is the debt limit?
The debt ceiling is the country’s borrowing limit. If the government needs to borrow more than that amount, it must seek approval from Congress to do this.
As the government runs deficits and spends more money than it brings in for taxpayers, it must regularly borrow money and increase 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 pay, interest on the national debt, tax refunds and other payments.
Many economists predict dire consequences of a default, including a downgrade in credit ratings, negative effects on borrowing and the dollar, potential devastation in financial markets, and thousands if not millions of dollars in job losses – all of which could lead to a recession.
Why is it so political?
Almost since its inception in 1917, the debt ceiling has been politicized by both parties, but by 2011 it has become not just partisan but dangerous, says Laura Blessing, an associate professor and senior fellow at Georgetown University’s Government Affairs Institute.
The biggest problem with the cap, according to some observers, is that it has become a dangerous political bargaining tool that holds the economy hostage to enforce political demands.
“The pattern shows that the Republican Party has enjoyed using this as a cudgel 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.”
The US government has reached a tentative agreement to raise the debt ceiling just days before the deadline. Almost every year, the country – and the world – is brought to the brink of economic catastrophe because of exceeding the debt ceiling. Andrew Chang explains how high the debt ceiling is and what would happen if it wasn’t raised.
What does Trump say about the debt ceiling?
On Wednesday, Trump said in a joint statement with Vice President-elect JD Vance that “raising the debt ceiling isn’t great, but we’d rather do it under Biden’s watch.”
“If Democrats won’t cooperate on the debt ceiling now, what makes anyone think they will in June while we’re in office?”
The next day, Trump spoke to numerous US media outlets and warned of a government shutdown unless Congress extends or completely removes the debt ceiling. In an interview with NBC News, Trump said eliminating the debt ceiling entirely would be the “smartest thing (Congress) could do. I would fully support that.”
“The Democrats have said they want to get rid of it. If they want to get rid of it, I would take the lead,” Trump said.
On Friday, Trump posted on his social media platform Truth Social: “Congress must abolish the ridiculous debt ceiling or perhaps extend it until 2029. Without them we should never make a deal. “Remember the pressure depends on whoever is president.”
It’s true that some Democrats have supported eliminating the debt ceiling, including Massachusetts Sen. Elizabeth Warren, who said in a social media post Thursday that she agreed with Trump “that Congress repeal the debt ceiling and never again.” should rule by taking hostages.”
But many Republicans steadfastly support the debt ceiling. That’s why Blessing calls Trump’s comments a “record-scratching moment” because he calls on Republicans to abandon this tool.
“That just contradicts the message. The political attempts, the strategy they used,” she said.
So why does Trump want to abolish the debt ceiling?
As Trump prepares to push an agenda of tax cuts and border security, Trump fears that a fight over the debt limit next year could, and has, derailed his plans is expected to cost trillions of dollarswrote New York Times reporter Alan Rappeport, who has covered debt limit fights during the Trump and Biden administrations.
“This has nothing to do with serious political ideology and everything to do with power,” said Todd Belt, a professor and program director at the George Washington University Graduate School of Political Management in Washington, DC
Republicans like the debt ceiling so they can force concessions and spending cuts when they’re in the minority, he said.
“But they fear that Democrats can use this to block the tax cuts that Donald Trump wants to pass when Republicans are in the majority, when the opposite is true.”
These tax cuts and other Trump spending priorities would mean there would be less federal money available to cover the debt, which is why Trump wants the debt limit lifted, Belt said, pointing out that the president-elect has now pushed for it because he does don’t want to be blamed for being wasteful.
“He wants to be able to say this is something Joe Biden signed, not me.”
Does this mean the debt ceiling is doomed?
Probably not so quickly.
While Trump and a handful of Democrats have called for its abolition, there doesn’t appear to be much political will or votes to abolish it, Belt said.
“Plus, there are the hardcore Republicans who want to stick with the debt ceiling because they really believe they were sent to D.C. to shake up the system and stop all the excessive spending,” he said.
