As the U.S. Congress scrambled┬аto come up with a spending bill┬аto avoid a government shutdown,┬аU.S. president-elect Donald Trump shocked many lawmakers by demanding that any such bill must also increase the country’s debt ceiling.
He insisted┬аthat any deal must include that provision for the debt ceiling,┬аthe┬аlegislative limit on the amount of national debt the country can incur. It’s┬аan issue┬аthat hadn’t been┬аdiscussed by either party.
Trump then┬аwent a step further, announcing, to the surprise of many lawmakers, that he was also seeking to┬аsuspend or eliminate the debt limit before he takes office in January.
However, Trump’s plans suffered a setback Friday night when the Republican-controlled U.S. House of Representatives passed legislation that would avert a midnight government shutdown, but left out his┬аdemand to increase the┬аdebt ceiling.
So why is Trump suddenly so concerned about the┬аdebt ceiling?
Hours before the deadline, the U.S. House of Representatives passed a short-term bill to avert a government shutdown and approved tens of billions of dollars in disaster relief.
What is the debt ceiling?
The debt ceiling is the country’s borrowing limit. If the government needs to borrow more than that amount, it needs to get congressional authorization┬аto do so.┬а
Because the government has been racking up deficits тАФ spending more money than the taxpayer revenue it generates тАФ it regularly needs to borrow money and raise┬аthat debt limit.
That money is needed so┬аthe government can┬аmeet 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 have forecast dire consequences as a result of a default, which could include a credit rating downgrade,┬аnegative impact on borrowing and┬аthe dollar,┬аpotential havoc in the financial markets┬аand job losses in the thousands, if not millions тАФ 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┬аfrom 2011┬аonwards, it has become not just partisan but perilous, says Laura Blessing, an adjunct professor and senior fellow with┬аthe Government Affairs Institute at Georgetown University.
The biggest problem with the ceiling, according to┬аsome┬аobservers, is that it has become a┬аdangerous political bargaining chip that holds the economy hostage in order┬аto extract┬аpolitical demands.
“The pattern has been that the Republican Party has enjoyed using this as a cudgel to try to force the Democrats into a legislative deal that would cut spending, which is their policy priority,” Blessing said. “And they haven’t been particularly successful at doing this.”
The U.S. government reached a tentative deal to raise the debt ceiling just days before the deadline. Nearly every year it brings the country тАФ and the world тАФ to the brink of economic catastrophe over the debt ceiling. Andrew Chang explains what the debt ceiling is, and what would happen if it wasn’t raised.
What’s Trump┬аsaying about the debt ceiling?
On Wednesday┬аTrump, in a joint statement┬аwith vice-president-elect J.D.┬аVance, said that “increasing the debt ceiling is not great but we’d rather do it on Biden’s watch.”
“If Democrats won’t co-operate on the debt ceiling now, what makes anyone think they would do it in June during our administration?”
The next day, Trump spoke to many U.S.-media outlets, warning┬аof a government shutdown┬аunless Congress extended the debt ceiling or eliminated it entirely. In┬аan interview with NBC News, Trump said┬аgetting rid of the debt ceiling entirely would be the “smartest thing [Congress] could do. I would support that entirely.”
“The Democrats have said they want to get rid of it. If they want to get rid of it, I would lead the charge,” Trump said.
On Friday, Trump took to his social media platform┬аTruth Social to post:┬а“Congress must get rid of, or extend out to, perhaps, 2029, the ridiculous Debt Ceiling. Without this, we should never make a deal. Remember, the pressure is on whoever is President.”
It’s true that some Democrats have supported the elimination of the debt ceiling, including Massachusetts┬аSen.┬аElizabeth Warren, who on Thursday said via a social media post that she agreed with Trump “that Congress should terminate the debt limit and never again govern by hostage taking.”
But many Republicans have been steadfast in their support for the debt ceiling. That’s why Trump’s comments are what Blessing calls a┬а“record scratching moment,” because he’s asking Republicans to give up this tool.┬а
“That is just counter to the messaging. The policy attempts, the strategy that they’ve been employing,”┬аshe said.┬а
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 a debt limit fight next year could interfere with his plans, which are expected to cost trillions of dollars, wrote New York Times reporter Alan Rappeport, who has┬аreported on debt limit fights during the Trump and Biden administrations.
“This has nothing to do with earnest political ideology and everything to do with power,” said Todd Belt,┬аa professor and program director at George Washington┬аUniversity’s Graduate School of Political Management in Washington, D.C.
Republicans like having the debt ceiling so that they can force concessions and cutting spending┬аwhen they’re in the minority, he┬аsaid.
“But they are afraid that when the shoe is┬аon the other foot, when the Republicans have the majorities, the Democrats will be able to use this to stymie the tax cuts that Donald Trump wants to push.”
Those tax cuts and other Trump spending priorities will mean┬аless federal money to cover the debt, which is why Trump wants the debt limit removed, Belt said, noting that the reason the president-elect was pushing for this to happen now was┬аbecause he┬аdoesn’t want to be blamed for being a free spender.
“He wants to be able to say that this is something Joe Biden signed, not me.”┬а
Does this mean the debt ceiling is doomed?
Probably not anytime soon.┬а
While Trump┬аand a handful of Democrats have called for its elimination, there doesn’t seem to be a lot political will or the votes to scrap it, Belt said.
“Plus,┬аthere are the┬аhardcore Republicans who want to continue the debt ceiling because they really believe that they were sent to D.C. to shake up the system and to stop all of the excessive spending,” he┬аsaid.
